Vacation properties are one of my favourite types of investments because they allow you to reap a lot of personal and financial rewards. If you’re smart with your planning you can use a vacation home for your personal enjoyment when you want, and rent it out in order to make money when you don’t. But there are some important differences between primary and secondary homes that you need to consider before you buy. Before you invest in a vacation property make sure you’ve asked yourself these 5 questions.
Can I Afford It?
People tend to get emotionally attached to vacation homes and as a result they don’t always consider the financial implications. Plan ahead for renovations and upgrades you might want to make, but also set aside money for unexpected problems like pest control and damage that can be caused by the elements. And before you can even think about renting it out you have to know that you can afford it on your own. A vacation home can sit empty for long periods of time so a good rule of thumb is that if you can’t afford it on your own without the revenue you’d get from renting it out, it’s not a smart financial investment.
What Are the Expenses?
Expenses will vary depending on where it is, what kind of condition it’s in, the size of the property, and whether or not you’ll rent it out, but things to consider include:
- A caretaker if you don’t live nearby and need someone to check in and perform general maintenance. (Or the cost of gas if you’re driving up regularly).
- Added maintenance costs as vacation homes tend to get more battered by the weather than primary homes.
- A cleaning service to clean up before/after renters.
- An investment in some smart technology such as a remote thermostat, remote key, etc.
- Added insurance costs as insurance is typically higher with vacation homes because they are vacant a lot of the time.
Is It In a Convenient Location?
Location, location, location. It’s as true for vacation properties as it is for any other. The distance from your primary home is very important because it will make the difference between being able to get there quickly to perform maintenance tasks on your own, or having to hire someone local to do it. You also need to consider how convenient it is for potential renters. Is there road access? If it’s an island property you’ll need to arrange for boat service. Also check out what amenities are available in the area (and if they’re all-year or just seasonal). If you rent to young people they might want some nightlife nearby, while families with kids might be interested in family-friendly local attractions.
Is it Winterized?
A property you can use all year long is a better investment (both personally and financially) than one that is only liveable for a couple of seasons. If you live in a cold climate make sure you consider the cold seasons. Is the home properly insulated and winterized? Is there road access when it’s snowy? Winter vacation homes can be a lot of fun and make a lot of money if they’re in a good location, but they must be comfortable and convenient.
Can I Share It?
Renting out a property to strangers isn’t for everyone, but if you still want the benefits of a vacation home without weathering all the costs on your own consider sharing it – either with your own family or another. Sharing properties can get dicey because emotions can sometimes get in the way of smart decision-making, but if you plan appropriately and draw up a fair agreement ahead of time you can avoid headaches and enjoy the benefits.