Thousands of people will be going away on vacation this year, whether that’s to sun themselves on the beaches of the Bahamas or to don a pair of skis at a winter resort. Chances are, you may be among them. One question on their/your mind may be…
… Where are am I going to stay?
Good question and there will be a range of options available for accommodation. For you, the answer to the question could be something you can profit from. If you have ever considered investing in a second property, why not invest in a vacation home. Not only will it be a property you and your family can make use of, especially if you buy something in your favorite vacation spot, but it can also be a money-earner should you prepare the property for rent. So, the real question to ponder on for the sake of this article is…
… Should I buy a vacation home?
While your gut instinct may be to answer in the positive, it is still worth knowing the pros and cons before going ahead with the purchase.
Investing In A Vacation Home: The Pros and Cons
Vacation Home: The Pros
- It is yours to keep! Although this is true with any property you purchase, the benefit of buying a vacation home is that you can use it for your vacation. No longer do you have to endure the expense of hotel costs. You will always have somewhere to stay in your favorite destination. You can use it for your vacation, and when you do decide to retire, you have the option of moving into it permanently. Growing old has never seemed so attractive!
- Provided you have bought a property in a popular tourist spot, you will always have people looking to rent it. The tourist industry is booming. You can make a substantial profit from the fact. Especially during holiday seasons, the property shouldn’t be sitting vacant for long. You can enjoy the income you generate for years to come, whether you use it as a full or part-time money maker.
- Other than vacationers desperate for somewhere to stay, the property can also be used for your friends and family. They can use it for their own private use, or you can get them all together for an annual gathering. The only thing people will need to pay for is the travel costs, so this is one vacation that won’t cost the earth.
- A vacation home is one asset that you can pass down to other generations of your family. Your children, your children’s children (ad infinitum) will always have a place to stay on vacation or as an effective income source, provided nobody sells the property in the meantime. This is a great legacy to leave behind.
- You can create a growing business, as the income generated from one vacation home can be put into another. Within a few years, you could be making a substantial fortune as a property tycoon, provided the destination remains popular with vacationers.
Vacation Home: The Cons
- The initial expense will be huge. If you intend to buy somewhere at the heart of a vacation resort, prices will be premium. The further you go from the main attractions, the cheaper the price of a property will be. This will have to be taken into consideration when charging rent.
- After buying the property, you will be hit with other expenses. While you will get some of your money back from rent, you are going to have to take out building and contents insurance (and quite possibly luxury property insurance) which will be an ongoing expense. The property will need to be furnished to a high standard, as you won’t receive a lot of custom (or good reviews on TripAdvisor) if you rent out something not worth living in. Then there are the ongoing mortgage costs unless you were in the fortunate position of buying something outright.
- Another major cost is maintenance. Particularly when renting out to tourists, you can expect some level of damage to your property, especially if you are renting it out to the beach crowd. Their wild parties will come at a cost, and you will have to pay out for damages that have incurred as well as cleaning costs. Assuming you live a fair distance away from your vacation property, you will also need to hire a property manager to keep an eye on the vacation home and to deal with any issues that prevail on your behalf.
- If you are dealing with any issues yourself, you are going to incur travel costs as well as dealing with the lengthy time it takes to get to the residence. This can impinge on the rest of your life. It can affect time with your family, as well as your job. Unless you are using your property as your main source of income.
- Having a vacation home is great for your vacation time. But you may miss out on other parts of the world as a result. Rather than visiting a new location, you may decide to return to the vacation home each year. This ensures you are making proper use of your purchase for yourself. While you can justify this in your head, your family may not be so happy. Especially if they are having to return to the same place every year for the annual vacation.
Other things to consider
Having looked at the pros and cons, there are a couple of other things to consider. These include:
- Where are you going to buy a property? You want to choose somewhere that you can enjoy your vacation and a place that is going to attract others. According to USA Today, these are the best and worst places for a vacation home, so factor them into your research.
- Can you afford it? Your bank manager will advise you further. Take any advice under careful consideration before you splash out on something. You can make a lot of money from your property if you are renting it. You can also lose a lot of money if you aren’t in a position to keep up with the ongoing costs.
Should you invest in a vacation home? That’s entirely up to you. Consider the pros and cons carefully, and shape your decision accordingly. Let us know your thoughts, and if you have bought a vacation home, share your experiences with us.