Vacation Rental Investments
Ask many people what they would buy if they won the lottery and chances are a vacation property would figure somewhere on the list. The truth is that you don't need to be especially wealthy to have a vacation property if you get smart and buy it as an investment to use for holiday rentals. While the economy may be impacting peoples vacation plans at the moment a vacation rental in the right location can still make attractive returns.
As with any investment, there are pros and cons to buying a vacation rental property. To get an idea if this is an investment strategy that might be suited to your needs it's a good idea to look over the ups and downs of this investment strategy and how they will impact you. The self contained accommodation market is booming, particularly abroad, and with the right level of due diligence you could be a part of that boom.
The first stage of due diligence is evaluating the risks. When buying a vacation rental property, you will want to carefully consider the upfront and ongoing costs, estimated returns, and requisite time commitments. Lending can more difficult than for owner occupied homes so you may need to pay a larger deposit or arrange non-traditional financing. This is especially true for international property purchases. HSBC and Deutsche Bank offer multinational mortgages to Americans, but they require a minimum of 20% down and only operate in select countries.
Additionally, while many self contained accommodation properties pay for themselves, prospective buyers tend to overestimate the returns while simultaneously underestimating the necessary time commitment. While some beach properties do return 15% or more annually, the vast majority of vacation rental locations average 4 - 5% returns. A vacation rental creates much more work than a normal long term rental property so if you don't hire a vacation rental agent you should expect to spend ten to fifteen hours a month on responding to enquiries, paying bills and cleaning.
With these risks in mind, the second stage of due diligence is evaluating the reward potential of your investment. The main benefits of buying a vacation rental are the opportunity to enter the lucrative self contained accommodation market, tax breaks, and the chance to hedge your bets in the US stock market with a real estate portfolio. These benefits can more than balance out the risks of owning a vacation rental property.
The self contained accommodation market continues to boom as vacationers seek more unique experiences. Families are especially interested in alternatives to bland hotel offerings. Your vacation rental can provide them that alternative while simultaneously offering you a chance to write off interest on the mortgage and benefit from property appreciation in more than one location. Typcially a vacation property will be much more stable in value than stock market investments that have seen dramatic falls in the past year or so. By carefully considering the pros and cons, you will be able to judge whether or not this is a workable solution for you. Many people who have made the bold move find it to be a rewarding investment, especially if they have done their research upfront and know what to expect. The security of a stock market alternative and the rewards of rental income can definitely make buying a vacation rental property a sound investment.
About the Author
Richard and Lynelda Greenwood run family vacation website: http://www.makemystay.com.au The site offers quality self contained holiday accommodation in Australia including Sydney, Melbourne, the Gold Coast and Noosa.
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