Becky and I have invested in several vacation properties over the years and we’ve found that they can really supercharge your portfolio. Vacation properties can offer an investor a unique opportunity in real estate investing. We scouted areas that were depressed in price but had a high supply of properties to choose from. We were prepared to hold for 5-7 years—or even 10!—if necessary.
I specifically remember a beautiful ski condo located right on the slope of a major Colorado ski resort. It was an amazing property. The owner had purchased another property on Cape Cod and, luckily for me, was anxious to sell. In that transaction we set the record for the lowest price per square foot on any condo in that area. When looking for huge profit margins, consider the condition of the seller. Don’t take advantage, but look for people ready to sell now.
This condo did well for us. In 12 months, the market turned around and we sold for $100,000 profit. Remember: You make money when you buy, NOT when you sell.
Here are some interesting facts and guidelines concerning vacation properties.
- Vacation homes on the average appreciate twice as fast as other single-family homes.
- Many second-home buyers will pay more for their second home than they did for their primary residence.
- Look for quality choices i.e. Waterfront, Beachfront Properties and Ski Areas.
- Your Return On Investment can be better than any other investment: i.e. stocks and bonds. This is often true and is why investing in real estate vs. stocks can be so appealing.
- The Rental Income Guideline for purchasing vacation properties is that you should be able to cover all costs in 12-16 weeks of rental income. This is the “high season” rental opportunity for most properties. Remember that a similar guideline is the 1.5% monthly rental return on regular rental properties, except this one is specifically for vacation properties.
- This is a great time to take advantage of historically low mortgage interest rates. Remember real estate is about finance as much as anything else!
What’s holding you back from vacation properties?
Join me every Thursday for real estate investing tips!