8 Factors to Investigate Before Purchasing a Vacation Property

5

I have been a property manager here in Orlando since 2006, so I feel very confident in advising investors on buying a vacation home. Here are eight tips you should consider before you go and put money down on a vacation home.

Download Your FREE Rental Application Form!

It may seem like a small thing, but having a solid rental application is the first step in finding great tenants. Since BiggerPockets is all about helping you succeed in real estate investing, we’ve put together a complimentary Rental Application for you to use. Download it today and go find some great tenants!

Click Here For Your Free Rental Application

8 Factors to Investigate Before Purchasing a Vacation Property

Know All Your Costs

Before you sign a contract, do your homework and know exactly what the true carrying costs of your vacation home are going to be every month. The carrying costs should include: mortgage, home owners insurance, property taxes, HOA fees, property management fees, pool service (if you have a pool), lawn service, monthly utility bills, etc.

I recommend after you have calculated all your expenses, you should make sure you have no problem paying these expenses even if your vacation home brings in zero monthly income. I have talked to too many investors over the years who bought a vacation home they could not afford and whose home became an anchor on the family’s finances.

Related: 3 Alternative Ways to Enjoy a Vacation Property Without Owning One

Find a Good Property Manager

A good property manager is key if you are going to be owning a vacation home. After all, the manager is the one who is going to be looking after your investment when you are not in town. A vacation home can deteriorate very quickly if the house does not have proper care.

I recommend driving around the neighborhood where the house you are looking to purchase is located and find homes that have good curb appeal. Then find the property managers who manage those homes. Chances are if a property manager is taking great care of the outside of a vacation home, then the inside is usually very nice as well.

Travel to the Vacation Home Location Before Purchasing

You will want to travel to the vacation home location quite often and make sure this area is where you and your family will want to travel and spend most of your vacations. You should also make sure that the area is easy to get to. I’m sure it is nice to have a vacation home in the mountains, but if it takes you a plane ride and a 3 hour car ride to get to, chances are you probably will not be visiting your vacation home too often.

Learn About Peak Time

If you are going to looking to get rental income from your vacation property, you should be aware that the most popular travel times will bring you the most rental income. So if you need income from your vacation home to make the deal work for you and your family, then you will probably need to use the house during the off season when the demand is not as great.

Know That Owning a Vacation Home is Not Always a Vacation

If you are pretty handy or if you want to save money, just be aware that when you visit your vacation home there will probably be a couple of days that are dedicated to doing general maintenance and repairs to your property.

The National Realtor Association has stated that the annual upkeep on a house should be around 2% of the value of the house. So if a house is around $150,000, then the owner should expect to spend around $3,000 annually on repairs and upkeep to keep the house in the same condition. The same rule goes for vacation homes.

Related: 5 Things No One Tells You About Owning Vacation Home Rentals

Be Aware That Lifestyles Do Change

My wife and I have a vacation home in Destin, Florida. When our kids were younger, we used the house all the time. Now we visit our property about every 18 months or so. As your kids get older, their lives become more hectic with sports, school, and church activities so there is not as much free time.

Check the Crime Rates

You will want to check the crime rates of area and make sure that you are purchasing a home in a safe place. High crime will kill a vacation hot spot quicker than anything.

Learn the City’s Future Plans

Go to the city planning board website or do some investigation on your own to see what future plans are for the city. This insight will be extremely helpful when you go to actually purchase a property.

I hope these tips help you when you go to purchase a vacation home. The biggest tips I can give any potential vacation homeowner is to be realistic in what you can afford and do not overreach when purchasing a vacation home. After all, a vacation home is a luxury item that has turned into a nightmare for far too many families.

Have any other tips for prospective vacation homeowners?

Let me know in the comments!

About Author

Trey Duling

Trey Duling has been managing and marketing vacation homes in the Orlando and Disney World area since 2001. His passion is helping investors make their vacation homes more profitable. Please visit his website at http://www.orlandovacation.com/home-rentals/.

5 Comments

  1. John Underwood

    Trey,
    I fully agree with all your comments.

    We bought a Lake house close to Clemson University and decided to turn it into a vacation rental after the fact.

    We manage it our self, we do the maintenance our self. We use Homeaway.com which also owns VRBO and vacationrentals.com to automate the renting process and this has worked out beautifully.

    See
    http://www.homeaway.com/vacation-rental/p3685237

    We can rent in the summer for vacations, fall for Clemson football games, March April for people wanting to fish and for fishing tournaments. Believe it or not people rent for Thanksgiving, Christmas and even in January and February for get a ways, girls weekends and reunions etc.

    The house is an hour away from where we live and my wife takes care of the cleaning. We stay there one or two weekends a month and do minor maintenance and enjoy the lake and relax some while we are there.

    I would love to have another vacation rental at the beach, but would hire out the cleaning and maintenance and still use VRBO or Homeaway to keep it full.

    John Underwood

  2. Very important information here! While some places are great to vacation in, making the next step to owning a home there is a different matter. You have to see what direction the city is headed and what it’s like day to day there, even if you’ll be using the homes for vacation yourself.

  3. William Morrison

    Trey, nice recap.
    I have a family member looking in another state and I’ll forward your article to them.

    Item #1 and #5 are linked. Things move from #5 to #1 as the HOA covers more and more. I was looking a gated location near you where the roofs on single family detached vacation homes were covered.

    The 2% is not bad but runs into an issue as you move around the country to areas of much higher land to building cost. 3 to 4% of PRV takes the land out and brings in the local wage and material rates. PRV is Plant Replacement Value. It’s the cost to replace the facility. Insurance companies have a replacement value, but it generally includes demo after a fire etc. It’s more like your depreciation number.

    Some properties have a land value at 2/3’s of the total because of vacation rental locations. Anyway thanks for the list.

Leave A Reply

Pair a profile with your post!

Create a Free Account

Or,


Log In Here

css.php