What to consider when buying a vacation Home.
Buying a second home is a great way to diversify your real estate investment portfolio. However, it is a riskier investment compared to the purchase of your primary home. It not only attracts a bigger deposit but also higher mortgage rates and without proper planning, it can wreck you financially.
Nevertheless, understanding what it takes to turn it into a great investment can save you the frustration. Here are the steps to make sure a vacation home is a great investment.
Consider Nearby tourist attractions when buying a vacation home
Guests jump on the idea of renting a property that’s located near permanent tourist attraction sites. This can be a national park, the beach, a mountain range, etc. With such attractions, you may even be booked out for a year in advance. Having guests all year round even during the low season translates to a high rental income.
Additionally, properties located near permanent attraction sites have higher values. You’ll not only win in terms of rental income but also property value appreciation. Thus, whenever looking for a second home you should give priority to properties located near permanent attraction sites.
Accessibility and infrastructure for vacation homes
Rarely will guests rent properties that are not easily accessible. Thus, your second home should be in a good neighborhood that has good infrastructure. Essential resources should be within a walking distance and the transport system should be easy to figure out too.
Ensure you have catered to the local as well as international guests in terms of accessibility. You will see a higher turnover if the property is easier to get to.
Home inspections are a must!
Are you considering buying a vacation home be sure you don’t miss the red flags you should look for so will not be getting into financial trouble. Hire a top notch home inspector.
Make sure your vacation home is in an attractive neighborhood
People on vacation want to forget the struggles of their everyday life. That’s why they pick luxurious accommodation in attractive neighborhoods. Thus, your second home needs to be in a neighborhood that has sustainable perks like a distinct culture, walkability, historic architecture, good-looking houses, and clean streets. For HOA neighborhoods, you will need to ensure that renting out the property is allowed before purchasing it. There is no need to have a second home that you can’t rent out if that was your primary intention when buying.
Minimal recurring costs
Every property requires regular maintenance to remain in a good condition. However, some properties are more demanding than others in terms of maintenance. This has more to do with the general condition of the property at the time of purchase. Rental properties have to be in good shape all the time to attract guests and entice them to come back. However, the ongoing costs should be kept in check in order to make profits.
The common recurring expenses include internet access subscriptions, utilities, landscaping, repairs, security systems, and association fees. Taxes ought to be paid every year as well. You can ask the current owner about the approximate amount of money he/she spends on the recurring expenses before buying the property. It will give you an idea of how much you are likely to spend on these. Avoid properties that have high ongoing costs.
Ability to sell your vacation home fast
You should buy a property that’s easy to liquidate if need be. Personal finances can change overnight and having a property that can be sold within a few days or weeks will be your saving grace. In cases of a weak economy, you won’t be the only one listing a property. Thus, your property should have a unique advantage over the rest to get a buyer fast.
In a sellers market you may find that you are losing homes in bidding wars due to multiple offers. Learn how to be a stronger buyer to purchase your vacation home.
Penthouses and waterfront properties are the most attractive ones to buyers. On the other hand, people on a budget will be looking for the best property they can get in an attractive neighborhood at the lowest price. However, these are not the only things that make a property desirable. Thus, consider the perks a property has before making it a second home.
The experience you are looking for in a vacation home
Besides renting out the property, you can also get different experiences from it. Thus, focus on the experiences you want from the property when picking a second home. A second home can be a happy place that you run to whenever you need a break in life or your getaway to joining a vacation club.
You can also pick a property in your favorite vacation destination so that you can visit any time of the year without worrying about accommodation. Additionally, it can hold a family-tradition value or open up a hotel business opportunity. Whichever experience you want, ensure the property you have picked can give you just that.
Pay cash if possible
You’ll pay more for your second home compared to your primary residence. Therefore, a second home purchase can propel you into massive debt fast if you are not careful. If you are still paying your first home’s mortgage then additional monthly payments can get overwhelming, especially if you are not stable financially. That’s why it is advisable to pay cash for a second home if possible.
However, not many people can pay cash in a property purchase. Nonetheless, you can pay a quarter to half of the price in cash then get a mortgage to clear the rest. The more money you can put towards the deposit the better. It reduces the balance hence the possibility of getting lower mortgage payments. It is important to learn how to budget when buying a second home.
Renting your vacation home
Be very careful when advertising your vacation rental home. There can be strict laws surrounding fair housing, civil rights and discrimination in various states. Violating these laws can result in hefty fines and more.
Learn the laws and abide by them at all costs! Be smart, ethical and hold yourself to high standards! If you are a first time home buyer or renter this is valuable information for you.
Hire a property manager
If you have a full-time job or the second home isn’t located in your local area you should consider hiring a property manager. He/she will oversee the day-to-day activities as well as take over the booking calendar. Since the property manager will always be within the property vicinity all the time, he/she can get to the guests quickly whenever they need assistance. Stretching yourself thin will hurt the investment. Most of the rental property owners who hire property managers break even in their investments within a short period.
Everyone has different reasons for investing in a second home but additional income is a primary factor for all. If the second home gives you a higher income you can clear the mortgage fast and start enjoying financial freedom. Thus, you need to be focused on ensuring that it is a success because the alternative will leave you frustrated.
Make sure you have your team in place and hire the right realtor, home inspector and real estate attorney to have a pathway to a successful real estate closing. With proper planning and a SMART business plan, there isn’t a limit on what you can achieve in this case!
Are you thinking about buying your first home? Do you want to know how to buy a house? If you are considering buying a home, there are many stages before you can move in. Given the fact that buying a house is such a vital step in one’s life, it is critical to know the home buying process ahead of time.
Are you thinking of signing up as an Airbnb host? Are vacation rentals a good investment? But is it always this cut and dry? We all know that owning an Airbnb property can be a profitable investment, but is it a good idea? Find out the pros and cons of owning a vacation rental.
If it is your first time buying a second home and you are looking for all the answers to your questions, check out this guide on buying a vacation home.
Before you run off and buy a place to rent on Airbnb or start renting existing space know what you are getting into by being a host. There are tax implications and time commitment and more if you are a first time Airbnb host.
Ever been curious about how much you can raise your revenues by, with Airbnb? Airbnb experts that has provided us to 12 Secrets to Success for New Airbnb Landlords. Managing a short-term rental business is not for everyone – or for every property – but it can be extremely profitable.
Tired of bitter cold winters? A home in one of Florida’s 55+ communities may be just the solution you are looking for! Before you dive into a major purchase make sure you know what is in store. Here is a helpful guide to get you started on buying a vacation home.
Real Estate information was provided by Eileen Anderson, a recognized leader in her field. Eileen can be reached via email at Eileen@eileenandersonrealtor.com or by phone at 860-966-2112. Eileen has helped people move in and out of many Connecticut towns since 2000.
Thinking of selling your home? I love Real Estate, sharing my knowledge and helping people find the home of their dreams!
I am licensed for residential real estate sales in the state of Connecticut including but not limited to the following CT towns: Avon, Bloomfield, Burlington, Barkhamsted, Canton, Colebrook, East Granby, Hartland, Hartford, Suffield, Windsor, New Hartford, North Granby, Farmington, Litchfield, Simsbury, Suffield and West Hartford, CT.