Investing in a vacation home is great because it gives you both a place to get away and a source of income at the same time. With a vacation home, you are making an investment in both your mental health and your financial health. This is an important decision you need to really think through.
Know What You Can Afford
When you purchase a vacation home, you need to make sure you are only purchasing a home that you can afford to pay the mortgage on by yourself. Ideally, you will be able to rent out the home throughout the year, allowing you to pay off your mortgage faster.
Don't assume your home will be rented out all year. You should have the money in your budget to easily pay your mortgage without needing any additional assistance from rental income. That way, your rental income will really be extra bonus income.
Account for All Costs
Don't make the classic mistake of only figuring out if you can afford the mortgage on the property. Make sure you can afford the overall cost of renting a vacation home. Can you pay for the insurance and taxes out of your monthly budget? Will you be able to afford to pay to take care of the home? Make sure you factor in the costs of own a second home, not just the mortgage.
Research the Market
Take some time to research the market. Reach out to companies in the area that help homeowners rent out their vacation homes and find out if they are looking to add more houses to their inventory, or if they struggle to rent out all the vacation properties they have. Get on sites that allow people to rent out their homes on their own, like Airbnb, and contact some hosts to find out if they have an easy or hard time renting out their property in the area.
Purchasing a vacation home that you intend to serve as a rental property only works if there is a need in the marketplace. You need to find out if there is year-round damage for vacation homes or if vacation homes are only popular a few months out of the year. This will help you better gauge the income potential of the home.
When it comes to purchasing a vacation home you intend to rent out, you need to ensure you can afford to pay the mortgage, taxes, insurance, and maintenance costs on your own. You also need to study the rental market to make sure your home could actually generate income.
To learn more about vacation accommodations and lodging, consult a resource in your area.