The Holiday Home: A Worthwhile Investment?
Do the holidays have you dreaming of a second home—a place to be with your family where you can celebrate, rejuvenate and get away? If so, you’re not alone. In 2013, sales of vacation homes increased nearly 30% from 2012. Sales in investment homes fell 8.5% in 2013. This pair of statistics begs the question: do the two have to be mutually exclusive?
It’s not out of the realm of possibility that you can have your cake and eat it too. Why not make your holiday home an investment property? Is it feasible? Let’s look at a four key questions to help you decide if your family getaway could also be a worthwhile investment:
- Do the numbers add up? If you’re making your vacation home an investment, it’s a given that your financial projections need to equate long-term gain. Start by talking to local agents and property managers about typical rates for rental properties and how much of the year you can expect them to be occupied. Don’t forget to figure in taxes, maintenance and management costs.
- Are you in the position to do a traditional mortgage as opposed to an interest only loan? If you’re not, the investment property becomes a far less lucrative investment.
- Is the locale ideal? This question is layered:
- a) Is the home in a place that holds a lasting affection for you and your family? It’s got to be a place that keeps you curious and excited, or you’ll find yourselves going less and less.
- b) Do you know the place well? That will help you determine the efficacy of the investment, year round. Meaning, if it doesn’t possess lovely qualities throughout all the seasons, then its rental appeal is limited to the times you are likely to be there. That’s a clear conflict.
- c) Does the location hold mass appeal for potential tenants or vacation renters? You need for people to want to be there, if the investment part of the arrangement is going to work.
- Who are your tenants? As much as you want your dream holiday home to be about what you love, if it’s going to be an investment, you need to think about whom the potential tenants are and what they will love. Does the home fit with the setting? Is it easily accessible? Does it have proximity to local attractions and amenities?
Once you’ve answered these questions, you’ll have a much better idea of when and how you can make that holiday dream a reality.