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Are you looking to buy a vacation home in 2015? Here are a few tips for any investor looking to buy a property.
7 Tips for Buying a Vacation Property as an Investment
1. Have a Stated Goal for Purchasing the Vacation Home
Before you buy a vacation home or even before you start to looking for the perfect vacation home, you should write down what your motivation is for buying the property. Do you want the property to be used as just an investment property or are you looking for a family getaway? Having a goal that is written down will help you in the purchasing decision.
2. Visit the Area
Take a short vacation to the area where you want to purchase the property, and talk to as many people as possible. Take notes and study the area: what area offers you the affordability and the best return on your investment?
If you are going to use the vacation home for a family getaway, make sure you really adore the area; after all, you are probably going to be spending a lot of time there.
3. Hire an Experienced Realtor
The realtor should have a lot of experience in buying second homes, and know a lot about the area. Before you ever start looking at properties, sit down with your agent and explain your goals and what you are looking for in great detail. After you have explained exactly what you are looking for, be quiet and listen to their recommendations. This is your time to learn and be educated.
4. Talk to Fellow Vacation Homeowners
Before you purchase make sure you talk to fellow vacation homeowners in the area. One of the best places to find owners is on popular rental sites, such as VRBO (to learn more about how to rent your place and list for free on VRBO, click here) or Homeaway (click here to list your place for free on HomeAway—only pay when you get a booking). Find a couple of rental properties that are very similar to the one you are thinking about purchasing, and call the owners of the properties. Most people like to help others out and share their knowledge.
One of the best questions to ask them is, “Do you like owning your vacation home in this area?” or “If you had to do it over again, would you still purchase this vacation home?” I think you will be surprised at how receptive most vacation homeowners are at sharing their knowledge. If you are having problems finding helpful homeowners, ask your real estate agent for a few names.
5. Know All the Costs
Do a little homework and figure out all your costs before you decide to purchase. This is really not that hard — you can call the local electric company, and they should be able to provide you with the last 12 months of electric bills and usage for the property; you should know your annual property taxes, home owners insurance, etc.
Once you have all these numbers, you should look at it and ask yourself, if we had a tragic event such as 9/11 and nobody was traveling for a couple of months, could I afford to pay the bills on my own with no income coming in from this property? The answer should be yes; if it is not, then owning a vacation home might not be the right investment for you at this time. Vacation homes are not without risk. Tragic events like 9/11 and the financial collapse of 2007 and 2008 do occur.
6. Find a Property Manager
You will need someone to look after the property when you are not there. A great place to find property managers is to ask for a couple of recommendations from your realtor and from the fellow vacation homeowners you talked to before you purchase the property. I suggest you interview at least 3 property managers before you pick one.
7. Figure Out Rental Income
You need to figure out how much income the property is going to produce on an annual basis, and then you need to compare that figure to the annual cost sheet you previously did. When you are figuring out your rental income, this is when you need to decide if you are going to do the rentals yourself or if you going to rely on your property manager.
If you are going to do the rentals yourself you should know where you are going to advertise. What is your nightly or weekly rate is going to be? How you are going to process payments? How much time you are going to be able to invest in keeping your property rented? Remember, most guests are going to want to make their reservations and talk to someone between working hours (8 a.m. to 5 p.m.). If you do not have the time to talk during those hours, it would be best to work with a property manager to at least assist you in getting bookings.
I hope these 7 tips help you when purchasing a vacation home. A vacation home can be a great investment, but you do need to do your homework and make sure you are purchasing the right property for you and your family. Remember, if a vacation home is not the right fit for you, there is no shame in waiting until the right one comes along. There are good investment properties out there; it sometimes just takes a little time and patience to find the right one.
What are your best tips for purchasing a vacation home you WON’T end up regretting?
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Note By BiggerPockets: These are opinions written by the author and do not necessarily represent the opinions of BiggerPockets.