Investing in Vacation Real Estate Property

October 13 2020
At a point in time you might have travelled on a vacation and you are undoubtedly exposed to new environment with ravishing atmosphere and experience. The fact about the vacation is that you find it difficult to forget the good and intimidating beach house or mansion in which you stayed even after months or years of returning.

You wish you have the experience every seconds again, therefore, being back seems not better to staying in the environment you did your vacation. Then, the thought about peacefulness, coolness and greatness of the vacation home keeps on developing your interest in investing in vacation home and the likeliness of making a great investment in it with enormous profit.

You developed disturbed mind with a lot of questions unanswered such as, buying a vacation home of my own will be a great investment? Should I buy a rental property for vacation?

Am I making sense by getting different vacation rental property in many locations with great tourism? You are about to overcome the disturbance the questions are posing you to and discover if the best choice for you is to invest in vacation rental property.

What to consider when acquiring a vacation real estate property:
Many factors need to be considered when opting for acquisition of vacation real estate property. The fact is that the desire that is borne out of your good experience is not enough to venture into acquiring it. Thus, the following should be considered in order to decide whether it is right for you to acquire a vacation rental property or not.

Stage of Life:
You have to consider whether you are raising a young family? What is the frequency of your travelling for vacation? On average, the sum of money you spend on vacation for both you and your family? Would you like to ensure your grown kids have a gathering place when you travel on vacation?
The ability to answer these questions will help you to determine whether the timing for acquisition of vacation rental property is good or not.

One the most important factor of any real estate is the insurance package. You will need to make appropriate calculation for the cost of insuring the vacation real property.
When insuring it, you should think about whether you are going to lease or rent it, then you will need to apply rental insurance and not natural homeowner insurance. One good thing about using it as a rental service is that tax deductible may be attached to the insurance.

Second Mortgage:
It is almost certain that the vacation home you are aspiring to acquire will be your second mortgage and thereby getting loan for it may be difficult. In fact, maintenance of it with your residence home may be more difficult.
Yet, decisions involving deciding to go for second mortgage should not be rushed into, you need to think it through very well. In fact, according to Realtor's association, in a survey conducted in 2014, up to 30 percent of the people who acquired second mortgage had to use their own cash to build it. So you need to assess your ability to finance it.
More so, according to John Lazenby, "second home loans generally require more money down and a better credit score than owner-occupied home loans." Thus, if you are hoping to use loan, you should understand and consider your devotion.

The location in which your vacation home is situated goes a long way in attracting the attention of the potential tenants, that is, if you are renting it. It also has greater effect on the transferability and sale of it in future when you eventually decide to do so. You should be only the person to admire the location of the rental property you are planning to acquire for vacation home, in short.
More importantly, you should not just acquire any vacation home, better way of making your choice is to acquire one of the vacation home you have used before.
The benefits of doing so are numerous and range from having better knowledge about the location to knowing better about features of the vacation home. More things to consider are proximity and time distance between vacation home and your primary residence as well as guest review of the vacation home.

Laws and Regulations:
This is very important especially when it is going to be used as rental property. You have to be sure that the laws and regulations guiding the environment in which your vacation home is situated do not prohibiting leasing of vacation home and other landed property.
More so, the geographical territory in which the real estate property you are acquiring is not a property of another organisation by law. There are situation whereby some certain laws permeates the building of home on government land and whereas after some years the entire property will become the property of the government.
So, the laws and regulations regulating the vacation home should be properly understood before acquiring it. A lawyer service can be sought on it if it is becoming ambiguous.

The understanding of season is very relevant to the location of the vacation home or any other real estate property. There is what is termed "high season" which simply means when there is high demand for the real estate property.
This becomes more imperative when you are leasing or renting the property out. Therefore, months in which high season falls into, you will know how to expect the demand for it and thereby maximize profit on it through the cost of renting it.
A good example of the need to pay attention to season is, renting a beach vacation home during the warmth months. However, expecting more rental income during "off season" may break your heart. Understanding both high and off seasons for your rental property will help you a lot.

Maintenance Cost:
Maintaining the property you acquired with huge amount of money should be taken with levity hand. Carrying out the maintenance could be an extra cost but it worth it and makes the property to last for a very long period of time.
So, you have to decide which kind of maintenance you are willing to adopt. There is self-maintenance which is done by yourself but this depends on many things such as the proximity of vacation home to your primary residence, the prowess in property maintenance skill, and availability (i.e. your ability to find time to maintain the property).
The other method you can use is to hire a property management venture that will charge you little amount to keep an eye on your vacation home or property. A rental expert once advised that one to two percent of vacation home should be set aside in order for repair and maintenance on a yearly basis.

Pros and Cons of Possessing a Vacation Rental Property
The following are some of the pros and cons that you will discover from buying or owning a vacation rental property:

  • Rental Income: there is a very high tendency that your rental income will not cease coming if you take proper care in acquiring vacation home. So you continue to earn on it. Especially, when paradigm shift is now being witnessed among travellers as they stay less in hotels nowadays as they stay in homes.
  • Enjoyment and convenience: you keep benefit from the vacation home as you travel to the location and tend to feel more comfortable rather than staying in others home or rent a hotel room. More so, you save more during vacation and when you return you tend to enjoy high return on rent.
  • Property Appreciation: like all other real estate property investment, an expected appreciation or increase in equity is enjoyed at a particular period in time especially during inflation.
  • Tax benefits: since it is referred to as a business, more deduction is benefited by the owner such as written off tax on mortgage interest, property management, repair and maintenance costs.
  • Family and Friends: as much as getting rental income may be a great benefit to those who desire to use the vacation real estate for rental service, others with different motive enjoys spending valuable time together with family and friends.
  • Expenses: raising the needed amount to acquire it is usually difficult. Also, after a careful plan, an unexpected cost will surface during the acquisition.
  • High repair and renovation costs: after the acquisition, maintenance cost will be another unavoidable expenditure which includes renovation and repair of some part of the vacation real estate.
  • Risk: like other businesses there are risks involved in owning a vacation home and these includes, financial risk, economic downturns, natural disaster and so on.
  • Lack of Flexibility: you might be constrained to stick with travelling for vacation to where your vacation home is situated in order to check on it and to justify the investment in it and cut down expenses.
Based on what you have been able to learn in this article on investing in vacation real estate property, I hope you will be able to make right choice. There are more to the pros and cons in regards to this investment, so it is proper to explore more on it.
However, generally, you can make right choice based on the answers you are able to honestly provide to the factors you need to consider as highlighted above. To learn more, explore here.

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Read Comments

Steven Rich
Sep 17, 2018:
Well done

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