The primary reason why so many people are investing in vacation rentals is simple: It’s an opportunity to make some extra income and build your investment portfolio. And the fact that you can stay there yourself helps as well.
However, finding and purchasing the right vacation rental is anything but simple. Without proper planning and good decision-making, you can easily end up with a property that wastes your time, energy, and money. Here are four essential steps to help you through the process of acquiring the ideal vacation home.
1. Figure Out How Much You Can Afford
Before you do anything else, it’s important to get an idea of what kind of home you can afford. Obviously, the purchase price is a good place to start, but there are many other expenses to factor in. This includes things like insurance, taxes, HOA fees, upkeep, and remodeling. Also, keep in mind that you will likely have to make at least a 20 percent down payment on the vacation rental.
Along with looking at your budget and estimating how much you can afford, you will need to determine what you need to do in order to qualify for a loan. When it comes to a second home or investment property, a conventional mortgage is one of your only options. Speak with a lender and make sure you understand the details of this type of loan. For instance, you can choose between fixed- or adjustable-rate, and paying 20% or more down allows you to avoid mortgage insurance.
Many vacation homeowners choose to purchase their homes as a limited liability company because this allows them to protect themselves against possible litigation. If you go this route, the easiest way to form an LLC is through a service.
2. Invest In the Right Property
Knowing your market is crucial to making the right decision when looking at property. Understanding where to buy is essential. You can identify up-and-coming neighborhoods through social media and also networking with real estate agents who can pass you leads in the areas you are interested in.
While TV shows might make it look inspiring, buying a fixer-upper can easily be much more trouble than it’s worth. This is especially the case if it’s your first investment property. Try to find a property with good bones that needs only minor repairs and cosmetic fixes. Not only will such a property require less time, energy, and money, but you will also be able to make changes gradually and rent out the home in the meantime.
3. Make Upgrades
Even if you get a vacation rental in great condition, you may still want to make some changes to the property in order to boost appeal to renters. Here are a few upgrades to consider if the property doesn’t already have them:
- Hardwood or laminate flooring (installation and materials typically cost $5 – $10 per square foot)
- A quality paint job in each room/space
- Updated appliances
- Updated hardware on cabinets
- Update or replace glass window panes
- Nice, clean landscaping
- Entertainment amenities such as an HDTV, cable subscription, board/card games, and equipment for outdoor activities (e.g., tennis rackets, badminton set, cornhole set).
4. Get an Agent
Your agent is going to be your most valuable resource here, so you want to work with a great agent. By expressing your needs, budget and plans, they’ll be able to guide you through each step of this process.
Buying a vacation rental can be a great investment if you come at it with the right approach. Remember to carefully determine what kind of property you can afford, and try to steer clear of fixer-uppers. Also, consider any practical upgrades that can boost the appeal of your vacation rental, and hire a qualified real estate agent to help you through the whole process. In no time, you could be adding a source of income and have another home to make memories in!
Credits: Article by Emma Croft – Image via Pexels