5 tips for buying a vacation rental property
Throughout Florida, many towns, communities, and cities have a reputation as resort areas that host loads of tourists throughout the year. These resort areas are places like Marathon, Florida, Orlando, and Watercolor, Florida. These cities mentioned as well as many other regions of Florida attract families, groups of friends and those looking for a place to stay that is not a hotel. These savvy travelers will many times want to rent a single-family house, condo, or townhome. These properties are categorized as vacation rental properties. The people that purchase these vacation rentals can be anyone from an experienced investor to a family that loves vacationing in this particular area. The following are some tips for buying a vacation rental property that a seasoned veteran should follow as well as the 1st time investor.
1. Do not purchase a property that you can’t afford
When you’re visiting an area that you think you may want to buy a vacation rental property, do not let your emotions take hold of the steering wheel. 1st and foremost, you need to realize that this is an investment and you need to be analytical about it. Get the cost to own or operate from your local real estate agent. Get an estimate from your lender for how much your loan will cost per month. When you put these numbers together, you should be prepared to be able to pay this on your own if necessary, without the help of rental income offsetting your bills. You never know if it’s going to have a bad year and you will have to float the bills and mortgage primarily by yourself.
2.Hiring an experienced realtor
An experienced local real estate agent can make all the difference. They can help you look at and find the most profitable neighborhoods or condos. Your realtor will also be able to walk you through the entire process. Helping you lay out the pros and cons of condos verse single-family homes, what different HOA’s include, and any restrictions on rentals that specific subdivisions or condos have. Your realtor should be able to send you available real estate for sale via email before you come and visit. That way, you will have an idea of what is available in your price range.
3. Find out rental income history
Not all vacation rental properties are equal. This is why it is a must to follow Tip number 2, hiring an experienced realtor. You need to have someone that specializes in investment properties and understands ROI (return on investment). Getting a professional return on investment worksheet from your realtor can put everything on paper in front of you and make it easy to understand. By seeing at least 2 – 3 years of past rental income will give you a good idea of how much plus or minus you will be in the future.
4. Look into the difference between a property manager and self-management
Although many people manage their rental properties themselves, it is not as easy as just putting it on a vacation rental website and collecting the money. When self-managing a rental property, you will need a cleaning service that will show up, have a handyman on call, a plumber, an electrician, possibly pool company and more. You will need to keep track of the rental income, state when and local taxes, and sometimes a local bed tax. A property management company can take care of all of this plus advertising your property. They will charge a fee that can be anywhere between 20% – 40% depending on where you are and what they do.
5. Be realistic on how much time you will use the property
1 of the biggest mistakes that many people make when buying a vacation rental property in a popular resort area is that they do not estimate the amount of time they are going to use the property. Just because you have only come to the area one week per year in the past, you have to ask yourself the question, “Will I visit more now that I own a property?” The amount of time you use your house or condo was directly offset your ROI. Also, now that this is going to be an investment you may want to think on coming to use it when it’s either not rented or on the off-season.
Guest Blogger – Danny “Wheels” Margagliano is a Realtor and blogger. He lives and works along the beautiful beaches of Northwest Florida in Grayton Beach. Feel free to visit him at 30A Local Properties to see some of the beautiful second home opportunities in that area.