Vacation Home
How To Invest in a Vacation Home
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Apr 19, 2012, 14:28

The motivation to invest in a vacation home is different than investing in a single family home. For an investor who is not only looking at real estate as an investment but also wants to enjoy and own a vacation home, this is the choice to go after. Buy a vacation home only if you would like to enjoy the property yourself. Vacation homes can provide extra income to offset the cost of ownership but if you would never visit the place yourself, probably you should consider a more traditional rental property with longer term renters.

With a vacation home, you get to enjoy it on your vacations as well as make some rental income on it when you are not using it yourself. The drawback however is that it is a lot more work to rent out a vacation home as compared to a single family home. Yu as an investor have to make the choice based on your motivation and desires.

Your vacation home is in competition with hotels and other vacation homes in the same area and therefore it also requires more work to stay above the competition. Competition also exists for single family homes and town homes but the scale here is much bigger. There are ore hotel rooms and condominiums for rental than let’s say single family homes. Renter’s choice in case of vacation home can vary quite a bit.

Renting a vacation home is not a necessity, it is a luxury unlike renting a single family home on a daily basis. Renters have different preference on vacation homes and usually prefer to have a view or easy access to the beach or casino or pool or spa and other amenities. You need to be able to keep all of these factors in mind when deciding on what kind of vacation home you are aiming for.

You number one consideration is your own choice of vacation home but you also need to be able to rent it out to cover your cost and stay cash flow positive.

Regulations on vacation homes

Some cities and communities have restrictions on an owner’s ability to rent out property for short term rentals. Short term is typically defined anything less than six months. It is very important for you to find out if your prospective vacation home has any such restrictions. Furthermore I f you are renting the property on a weekly or short term basis you need to have a business license and collect occupancy tax from the renters. Since the rules of each area are different, it is very important to become familiar with them before you buy a vacation home.