What You Need to Know Before Investing in a Vacation Home
We’re almost one month into Summer 2022, how much money have YOU spent on vacation homes? Once your clients realize just how much they are spending on websites like Airbnb and Vrbo you may find more people coming to you, considering investing in a vacation home. We’ve composed some tips for you and your clients, to help decide if investing in a home away from home is right for your family.
Real Estate Agents, educate your clients so they can understand what a great source of income this investment could be- with the added benefit of not having to spend a single dollar on future weekend getaways! That being said, be prepared to give up some of your peak-season vacations. Mostpopular vacation spots have peak seasons. In ski towns like Aspen, CO you’ll see visitor rates spike when it’s snowing from December to February. While places like Southern California are a more popular summer getaway. Rental demand peaks durings this time, so make sure to plan your trips to your vacation home outside of these busy times to maximize on your home’s rental income. You may have to travel to Utah or Big Bear to play with snow during peak season.
We don’t recommend buying a vacation home unless you’ve visited the city several times yourself. You will be spending a lot of your free time in that place, you don’t want to feel like you’re working when you have to visit your property. You probably shouldn’t invest in a home that’s going to require you drive 13 hours or take 3 planes to reach. Pick a more easily accessible location, this way you don’t dread maintaining the place yourself and you can use the place to enjoy time with your own family. It’s not a timeshare, you can’t just walk away and go to a different home if you’re getting sick of the area or the scenery. Now, of course, you’ll have to be realistic about the cost. I absolutely adore beach homes, and I can drive out to Malibu as late as midnight every night and I won’t get tired of the area or the scenery. But if I had to buy a vacation home, I wouldn’t be able to afford the total price of the investment by myself. As a real estate agent, it is your jump to think about and research property taxes in the area, insurance rates and any other local carrying costs. Check local crime rates by calling the police station, this is especially important if the locals notice your home is unoccupied for long periods of time. You want to avoid dealing with headaches like break-ins or other serious crimes. You may find it vital to invest in a good security and alarm system.
Unfortunately, the bills for a vacation home don’t just stop piling up if it’s not being rented out. As the homeowner you will still have to pay for gas, electric, trash removal, landscaping, outdoor and indoor maintenance and any other costs that come up. Create an Excel sheet, and sit down with your financial advisor if you must. Figure out your budget and make sure you don’t wade in way over your head with this investment.
You always have the option of bringing in investors; be it strictly financial investors or family members who not only help cover the costs, but watch your home when you are away. You may not always be available to drive out to the rental property in case of a problem, or maybe you are looking for a more hands-off investment. If you invest in this with your siblings or parents, you can share the burden of property management with them. If this doesn’t sound right to you, you have the option of finding a local property manager that can maintain your home and deal with the renters. This could be a real life saver for anyone with a busy schedule. Homes, especially those around severe weather conditions, need much year-round maintenance. Vacation homes are being occupied by all types of people, and people who don’t have sentimental or financial ties to the property. They are more likely to damage the property, so it will need even more upkeep than your primary home. Be aware, and be prepared to spend the first week of each season at Home Depot or hiring local contractors to prepare your home for the summer rush.
You will also have to decide if you are looking for long term renters or short term vacationers. Sit down with your realtor and figure out the rental potential, think long term and be very clear on your goals and needs. A local agent can tell you off the top of their head what the rental prices are currently, they will keep your expectations realistic. You will want to know what the local occupancy rates are as well, how often will your home be unoccupied and how does this affect the bottom line? In case it is a bad month for short term rentals, will you be able to afford all overhead costs until business is doing better? Speak to local vacation rental companies, they should know the specific numbers and be able to help you educate your clients. Arm them with the right information to make the right decision for themselves, if you are about to deliver bad news by telling them the property or area they chose wouldn’t be the smartest investment for them, come up with an alternative before approaching them. Your client, their pockets and their happiness is always the priority.