A vacation rental is the ‘must-invest’ property right now and many people are looking at throwing their savings into swanky villas and beachside apartment around the World. There are many different motivations for why people are doing this, some are looking for monthly cash flow by way of rentals, some are looking to invest in up and coming locations and flip their property for a high yield, others are looking for a nice place to spend their summers with a little bit of financial kickback and some are after all of the above. Brian Ferdinand, a rental property management expert spoke to us recently about some of the things that you should be considering if you are after a vacation property.
Can You Afford It
This may sound incredibly basic but one of the first things that you should be considering is whether or not you can afford the property before you start looking for the best places to stay. We are not just talking about being able to afford the property itself, there is far more to consider than that. When you buy a vacation property you will be locking in a great deal of money that you may not see again for a very long while, if at all. There is no guarantee of profit on your vacation property, nor is there a guarantee that you can rent it out for 52 weeks of the year.
Calculate All Costs
When it comes to the affordability of the property you should also consider the monthly payments which you will have to make. Insurances, utility costs and maintenance fees all add up and when you are doing your costings it is vital to include these unavoidable expenses. You also need to factor in the cost of decorating and furnishing your vacation property and if you want to make it more appealing to would-be guests, then it is worth your while to make it look beautiful.
You should be considering the fact that there may be long periods of time when your property is vacant and this can create a security issue. When buying a property you will need to ensure that you have sufficient deterrents to avoid thieves targeting your home.
As someone who rents out their property you may be liable for additional taxation of up to 11 percent depending on which state you are operating within. Rental income is taxable on your returns and if you are renting out a property for more than 6 months of the year then you will be expected to pay the same kind of taxes as innkeepers and hotel owners. It will be important that you understand what the rules are around the taxation of your property before you buy.
If you are buying a vacation property with the idea of using it for personal use before looking to gain a profit then you should think honestly and seriously about how often you are going to use the property. The location of the vacation home may seem perfect and idyllic right now, but can you see yourself using it enough to truly make the most out of the investment?