Investing in a Vacation Rental Property

vacation home investment

Over the past couple of months, I’ve written a few articles about purchasing a second home as a way to have a “vacation” from your everyday life and put the dollars you would normally spend on holidays into something that yields a level of equity. Julie and I would love to have a second home in Colorado or New Mexico, but with the long drives, we are not sure we’d end up getting our money’s worth out of it.

Another option, beyond using the home exclusively for our own use, would be to consider renting out the vacation property to other families. Then, we could escape the Texas heat in the summer, fit in a couple ski weekends and get help with the mortgage in between. Going down this path, there are things to consider. First, you will need to be comfortable with the idea that this is a home that you get “first dibs” on during a calendar year, but that it will be enjoyed by others the remainder of the time. While most rental homes have an owner’s locked closet to store highly personal items, the things that are not put away are there for the benefit and comfort of your guests.

Next, you need to think about what makes sense for you to spend on a vacation investment property. Given that the loan would not be for a primary residence, the rate would be appropriately higher. Yet, the process to qualify for an investment property is very similar to the process for qualifying for your primary residence. Like any loan, you have to demonstrate you can afford the percentage down and monthly payment.  If you shop for a property that is already being rented on a regular basis, and we can show it has consistently generated income, we can use that income as part of the equation when you look to qualify for the loan. Unless you really know a market, I would encourage you to select a property that has already demonstrated its ability to generate the yearly income you would need to comfortably afford it.

Finally, you need to consider how you want to manage everyday items, such as booking rentals and repairs.  In most areas, there are property management companies that specialize in such services. You can go a la carte, or just tell them to manage the whole thing! Pricing really varies by location and level of service.  Unless you are in the business of renting properties, I would encourage vacation rental owners to let a local property management company handle everything for you. They are in tune with both local rental prices and repair costs–and will have much more sway with local folks (e.g., housekeeping, plumbers) given how much business they send their way.

Here are a just a few listings and comparable rentals from the areas we’ve featured….

Broken Bow, OK

One Currently for Sale and a Comparable Rental

 Glen Rose, TX

One Currently for Sale and a Comparable Rental

Just for Fun…..Historic Downtown Breckenridge Homes

One Currently for Sale and a Comparable Rental

Want to learn more about investment home opportunities? Send me an email or give me a call at 214-529-9622. Your next vacation is just an investment away!

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