To profit big in vacation properties, from a real estate perspective, you need to know the advantages. Investing in a vacation property is unique and actually really enjoyable. It can also be completely hands-off for you if you go through a management company!
Here are 4 awesome things about vacation properties:
- Short Term Rentals: This is one of my favorite advantages. I own property in low-to-moderate income neighborhoods in various parts of the country. When we rent in those locations, the tenant demand and, in some cases, tenant problems are usually higher. It’s a lot of work for the landlord. But in a vacation property market, what I call luxury vacation properties, you can do short term rentals. This is where people just rent for a weekend or a prime period. For example, someone could rent an oceanfront property from Memorial Day through Labor Day. And sometimes longer! In ski properties, you’re looking at December through March. I love this because you can have a management company handle everything and it can be completely hands-off for you—especially in condominiums. With condominiums, the outside of the property is taken care of in your HOA’s. When you look at that comparison, you can almost view vacation properties like you would liquid investments. You can fairly accurately figure out your return and, when done properly, it’s a low-maintenance, low-demand type of investment on the owner. I’ve owned several condominium properties in ski areas. I simply turned them over to a management company and allowed them to rent, manage and market the property. They just sent me a check. It was a no-headache, no-problem, get-your-check-in-the-mail experience!
- Enjoyment: Easily one of the unique and awesome benefits to owning a vacation property is that you also get to enjoy it! I only rent the property part of the year during the vacation season, and then my family and I use it for basically no cost. My renters paying the short term rentals are actually paying the property down or paying the interest for me. While they pay for it, I just get to enjoy the appreciation of the property and the use of it. I can take my family even during the high season for a week or more, depending on what income the property is producing. My children and grandchildren get to have a great time at a vacation spot that actually pays me over the year.
- Substitution: Whenever you take a vacation, domestically or internationally, the cost factor can get pretty high with airfare and hotels and food. But if you have your own property, you can do the substitution factor. Take the amount of money you would have spent on a vacation and instead use it to purchase a vacation property. You use the money to create value in an asset. When you’re done with a vacation, you’ve only spent money. You don’t get anything back besides the wonderful memories (which is worth it!). But you can have a great time full of wonderful memories at your own vacation property! You can use it to create years of tradition. Just take the money you would never financially get back and use it to purchase a well-located property. Then substitute those vacation funds to acquire the property.
- Control: This is also an advantage of real estate in general, but is particularly so with vacation properties because of marketing. When you purchase stock, you have no control over whether that stock goes up or down. But in vacation properties, you can control how you market that property to increase the return. For example, with ski properties you can advertise on various vacation rental sites or in a ski magazine or a local neighborhood association paper. You create demand for your property by marketing it aggressively. Or you can decide to turn it over to a management property and let them handle marketing. You can also improve the property: you can buy a vacation home, put new carpet in, fix the cabinets and counter tops, repaint the walls, etc. And on top of all that, you also have control of when you’re going to rent it and when you’re going to use it and when you’re going to sell it! The control factor in owning property is something I really love about vacation properties specifically because you can use them and rent them–and have complete control over that. Of course, you can also control the protection of your property by insuring it from loss. I’ve had fires in two of my properties, and in both cases I came out well on them because I was properly insured.
The advantages of owning vacation property are really incredible. I definitely recommend giving it a try. Not only can the property be a fun project and escape for your family, but it can be an asset that continues to cash flow.
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