4 Considerations Before Buying a Vacation Home in Florida
With Forbes Advisor reporting that the short-term rental industry is finally gaining some traction again, it’s worth considering investing in a vacation home, especially as a rental property. Data from Airbnb shows that between March and September 2020, occupancy rates in short-term rentals grew by 13% across 300 US cities. With these numbers, any future home buyer is guaranteed to find a revenue stream that supports their investment.
And when managed properly, the value of your vacation home will only appreciate. So if you want to make the most out of your vacation home, here are a few questions you might need to consider.
1. Can I afford the mortgage or, at least, the down payment?
If you don’t have the cash to pay for your vacation home out of pocket, or the deposit, our ‘Home Affordability Calculator’post can help you crunch the numbers to determine the right home for your income. Try to set a budget for yourself, and cut down on any unnecessary expenses to ensure you have more money to pay down the mortgage.
2. What are the additional costs?
Personal finance website AskMoney covers real estate investments and provides their American readership with detailed guides on how to get a foot on the ladder. In one of their articles, they go over the factors investors should consider before buying property. The article notes that on top of a mortgage, investors also need to factor in any additional carrying costs. These include property taxes, insurance premiums, potential homeowners’ fees, plus the cost of maintenance and utilities.
3. Can I maintain the property?
Understanding which things need to be improved is also very important. If you don’t live near your vacation home, you might not be aware of the different upgrades or repairs your home might need. In this case, you will either have to make regular trips to assess the condition of your property or hire a property manager to supervise your property for you. Property managers can also help organize building maintenance, advertise your property, and even manage tenants and collect rental fees.
The real estate investment research website iPropertyManagement covers a lot of topics related to the finance aspect of real estate. In one of their guides, they report that most property managers charge 8-10% of a property’s rental value. To make sure property management fees don’t eat up a big portion of your return on investment, do your research and read reviews on property management companies to get a good grasp on the quality of their service.
4. What else can I do with it?
Capitalize on your property’s features as a vacation home by making it available as a short-term rental. This way, you can generate higher profits, while also making sure you can reserve some time within the year to use your property yourself. Make sure to check your area’s rental restrictions, as many US cities have placed legislative limits on short-term rentals in residential areas.
If you’re not planning on using your property that often, you can also consider renting it out for long-term use. Although long-term rentals will limit the time you can spend in your vacation home, they can be a relatively stable revenue source. Another option is to only rent out a portion of your vacation home, as some Airbnbs do. This way, you can generate profit while also having the option to occasionally visit and oversee your property while it is being occupied.
As long as you stay on top of general upkeep, vacation homes can be lucrative assets. To prepare for your second property, make sure you have a realistic idea of the money, time, and effort needed to maximize your investment.
This article was written by Jennifer Birch for cfimortgage.com.
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