You’ve done the hard work for years, and now are looking to make a sound investment. You want to make one that will bring you and your family great times and special memories – the purchase of a vacation property. But in order to make that investment sound there are seven things that are essential to making the right decision. Check out our list below:
- Location! Location! Location!
This principle is really no different from the investment you made in your primary residence. Conditions within a property can always be fixed. What cannot be fixed is a property that has the potential for view blockage or change from nearby development. Before you buy, ask your knowledgeable and professional agent all about the surrounding neighborhood and any development plans that are currently in the works.
- Consider The Financial Responsibility
Do you plan on occupying your vacation home exclusively as a home away from home? Or are you planning on renting it out during times you know you will not be there? You must also consider that your new vacation property may also have a homeowner’s association with regular dues. You may also have to have the property insured for floods if it is in a beach area, and keep in mind the usual utility expenses, cleaning services, and landscaping services.
- Know That Loan Requirements Are Different
Second homes and investment properties are different from your primary residence as they often require as much as a 25% down payment or higher. It is typical for mortgage insurance to not be available for these types of properties. If you plan on using potential rental income from the property to help you to qualify for the loan, you will need to provide around two years of verifiable experience as a property manager. You should also know that home equity financing or mortgage financing is not available for certain types of properties such as time-shares and condominiums.
- Chat Up Your New Neighbors
If you have any chance at all to talk to your potential new neighbors before you make an investment, do it. Ask them what they like – and dislike – about the location of the property and the neighborhood in general. Neighbors can be a great source of information on a variety of subjects, and can provide all of the detail that is not known unless you have spent time in the area. Many homes nearby are likely vacation rentals. You may want to consider renting for a week in a nearby home to try out the area.
- Check Comparable Sales Prices
In the age of the internet, your buyer agent can provide a summary of comparable sales. This enables you to educate yourself about the range in values from low to high that were paid for similar homes. It will also give you the difference between list price and sale price so you will feel comfortable knowing what a reasonable opening offer would be to start the negotiating process.
- Crunch The Numbers
The best property investors will look at numerous income and expense scenarios before taking the plunge. There are at least three possible scenarios to look at, best case, neutral, and worst case. If you can stay comfortable with the worst case scenario numbers for five years, you can afford the property. One of the assumptions for worst case should be the complete loss of your primary income. Another worst case scenario is a loss of up to 40% in the value of the property, and increase in interest rates.
- Know Area Rental Rates And How To Market Your Vacation Home
If you are like many investors and want this to be a source of income, you can check the rental rates for similar properties on Airbnb and VRBO. This is also an excellent place to market your property once you have closed on a deal. You can also market your rental property on the St John Villa Owners Rental site www.stjohn-villarentals.com.
The more places you market your property, the more visible it will be to people. If you follow this sound advice, you are much more likely to have the St John vacation home of your dreams.