Finding the perfect vacation rental to purchase and rent can be a challenge in today’s market. It can also be the best time to buy a few nice rentals because there are so many properties available to choose from because we are in a buyers market. Not only is there a bigger selection to choose from, but you can also get them at a reduced price because house values have gone down in recent years.
One of the first things to consider when looking for that perfect rental is location. Just like buying your main house, you should keep the location of your rental house in mind when looking. For example, a beach front house will be easier to rent, and give you higher rent income then a house that is close to the beach.
Another thing to consider is the quality of the house. Sometimes you can find a fixer-upper that can be bought well below market value, and fixed fairly cheaply, but you could just as easily fond a house that looks good, but cost a fortune to fix. You should have the house inspected in order to assure that there are no hidden surprises that could cost you a fortune to repair.
You can easily find out if a potential rental is worth your time and money by finding out what other rentals in the area are being rented for. You should also find out how far in advance they are booked for, and find out how much you will have to pay in taxes and insurance. This can help you decide if the market is hot enough to be worth your time and attention. Ask the current owner if the property has ever been rented, if it has, ask to see the records to get a good idea of the income the house has generated in the past. As a general rule, the income of the rental should generate between 5% and 15% per year of the houses market value.
A condo can also make a good vacation rental because the property developers have more money to invest, therefore they can afford to buy the best property. Condos also have features that a house might not have such as a pool or gym. They also have a staff to keep the condos looking nice and clean. When looking at condos you should make sure that you will be able to rent it as a vacation rental because sometimes the homeowners association won’t let you rent the condo.
Finally when you find that perfect vacation rental, you should decide if the loan will be a second home loan, or an investment property loan. A second home loan generally has less interest and cheaper fees than an investment property loan but does not consider the income from the rental, while an investment property loan does consider the income from the property. Don’t forget to do your homework and make sure that you can afford the loan payments during off season times.