Tips for Buying a Great Vacation Rental Property
Should You Buy a Vacation Rental Property?
A second home or vacation rental is often a dream of many people. But is a vacation rental a sound investment? It can be the foundation for wonderful memories for you and your family, but you may also be thinking about the possibility of renting it out to make some extra money. As with any real estate, style, size and location will have a big impact on both how much you'll pay for the property and how much income you will make.
Here are 6 things to consider if you're thinking of investing in a vacation rental.
- Revenue can be seasonal – It's a rare property whose income doesn't ebb and flow with the seasons. And remember, you can attract higher rents in peak periods. The downside is, this might be when you wish to spend your time at the property. So if you buy that condo on a golf course in Florida, make sure you don't mind golfing in the shoulder seasons. In addition, check the rental rules and regulations in any condo complex, as many do not allow short term rentals, some with as high as 90 days minimum rental periods!
- Location is critical – This will determine your income more than any other factor. Properties near the water and close to ski areas will do very well compared with those in a town several miles from the coast or mountains. Try to find somewhere that's a popular destination.
- Calculate costs – Due diligence is critical to ensure the rental does not become a cash-flow headache. Be sure you can handle any mortgage costs, as well as insurance, taxes, maintenance, cleaning, and the fees taken by a property management company if you choose not to do everything yourself.
- Don't underestimate maintenance – You'll find the property will stand empty for weeks at a time, and this can lead to problems going unattended. Renters can also cause damage or break items that you need to have in order to continue renting. Take this into consideration when calculating maintenance costs.
- Check tax benefits – Use a professional financial adviser to maximize any opportunity to gain tax advantages and write-offs from your rental.
- Don't be blindsided – If you spend a certain number of days in a vacation property or more than 10% of the days that it's rented, you could lose all tax benefits. Talk to your professional financial adviser to get the latest tax rules.
So are you ready to think about purchasing a property? We have contacts worldwide! Let's chat and get the ball rolling.
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