Vacation homes are an ideal investment for those looking to dip their toes into the real estate market while still being able to have a bit of fun. Before diving in feet first it is best to consider the issues listed below before investing your money.
Having a budget in mind is vital, this will be the foundation of a successful buying experience. This is going to make it easier to find the perfect home that will be in the right area and at a price that is affordable for you. Get your budget in order so you have a solid range to work with when it comes to looking at properties.
Can You Afford Yearly Costs?
Having a vacation home is going to bring along with it a new set of costs that have to be accounted for in your budget as well. In addition to your current home, you will all have all of the same bills, taxes and maintenance. You don’t want to be surprised at the costs as they pop up. Be sure to make an inventory of all of the expenses that will be associated with the purchase of your new home.
How is the Rental Market in the Region?
If you are going to be spending a lot of time in another city or country, you have to think about the rental market. Your vacation home shouldn't be sitting vacant unless you are ready to eat the costs that come with such a decision. Most people are not, and that is why you are going to need to research the rental market as soon as you can. This will determine whether this is a smart investment for your bottom line. You want to go into a market that will make renting it out when you are not there is easy.
What about Emergencies?
Let's assume you get a phone call in the middle of the night about an emergency that has occurred on the property. What are you going to do about it, have you thought about the solution? Do you have the money to take care of it on the spot? You will need to hire someone to watch over the home when you are not occupying the house. You can get estimates from property management companies in the area.
Vacation homes are not always going to be full of positives and this is a reality you need to be prepared for. You need to be prepped for the emergencies and have a solution in place along with the funds readily available.
Where is the property going to be purchased? You need to think about the location even if you have an area earmarked for the investment. It's not only about the city but more about the neighborhood you are going to be in. It is essential to think about amenities and other details, so it can be rented out in the future when you are not there. Contacting a well-qualified real estate agent such as, Philadelphia Remax will be vital.
How often are you going to be using the vacation home? You can take advantage of the times you will not be vacationing in your home, by using it as a rental property. You need to think about whether or not this is feasible. There are people who need to get the rental income coming in or the asset is not going to hold much value at all. It is smarter to think about usability metrics and then progress from there. If you are not thinking about usability details, you are going to end up with a vacation home that is not as efficient and will lead to a proper net loss.
General Asset Value
Rental income can often start to overshadow things and that's not the way to approach this. A vacation home is more than an asset to draw in rent and then visit for a trip. It is about adding an asset to your portfolio that is going to grow and will let you hit new highs over time. This is going to include the asset's value on the open market if it were to be put up for sale. Would it sell well? Would it net you a good return or would you have to eat a net loss? These are questions you will need to consider.
Investing in a vacation home is exciting and most people enjoy the process but you need to go in with a solid plan. This is how you are going to get a good return on your investment and ensure that the transaction goes smoothly.
Tarik Pierce is the founder of InvestorTrip.com and regularly contributes articles to this website.
While living overseas, he uses PureVPN for a low cost VPN service.
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While his background is mostly related to trading stocks, he recently gained interest in real estate crowdfunding with Fundrise.