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Rent To Own Vacation Homes

What Is A Second Home

How to Rent A Vacation Home (BEST) Lessons Learned

As it relates to mortgages, a property is classified into one of three categories: primary residence, second home or investment property.

Generally, vacation homes fall into the second home category. A second home is a residence that is occupied by the owner for a portion of the year.

To be considered a second home, your vacation property:

  • Must be occupied by the owner for a portion of the year
  • Must be accessible and suitable for year-round occupancy
  • Must be a one-unit dwelling
  • Cannot be subject to any rental, timeshare or property management agreements

Different lenders will likely have their own additional requirements and restrictions. Be sure to discuss your expectations and intentions for the property with your lender at the beginning of the process.

Two Seasoned Travelers Argue The Merits Of Owning A Vacation Home Versus Renting A Variety Of Them

LIVE THE DREAM? Owning a vacation home means you never have to worry about check-out times. But renting a vacation home means that you never have to fret over home repairs.

For the recurring series, Thats Debatable, we take on a contentious issue of the day and present two spirited argumentsone in favor and the other emphatically opposed.

BUY: WHAT CAN BE MORE RELIABLY RELAXING THAN RETURNING TO THE SAME HOUSE TIME AND AGAIN?

Its a freezing winter morning in Vermonts Green Mountains, and I wake up in a comfortable bed, in an old farmhouse with an exposed post-and-beam frame thats been wrapped to keep the heat in. The sun bounces off the snow outside inside, it is toasty and dry . My husband and I bought a fixer-upper on a beautiful property on Stratton Mountain in 2014 and spent a year renovating. We chose to own for the same reason real-estate agent Cheyanne Pugliese, of Strattons Wohler Realty Group, says most of her clients doto have a space for friends or family to gather with maximum relaxation and minimum logistics.

RENT: WHY BURDEN YOURSELF WITH A SECOND HOME WHEN THERE ARE SO MANY ATTRACTIVE VACATION RENTALS?

I dont mean to sound like a downer. You deserve your vacation home and its gorgeous sunsets, glistening waters, rolling hills, whatever. But you can borrow that place for less money and less responsibility. After all, if its really your home, is it really even a vacation? Mike Jordan

Financing A Vacation Rental Property

Most investors will have to seek out a source of financing for their new rental property. Luckily, there are several options ranging from short-term to long-term. Conforming loans, portfolio loans, multifamily loans, and short-term contracts like a bridge loan or hard money are all available to you.

  • Conforming Loan: This is a popular option for vacation rentals because the criteria for qualification are not as strict as those for a primary residence. A good credit score and a down payment of around 20% are common.
  • Portfolio Loan: Portfolio loans are often used by investors with either multiple properties or one multi-unit property. Qualifications for these loans are more lenient than other types.
  • Multifamily Loan: Multifamily loans are used for 2-4 unit vacation properties or apartment buildings with more than 4 units. Portfolio loans fall under this umbrella, along with conventional mortgages, government-backed loans, and short-term multifamily loans.
  • Short-Term Loan: A short-term loan is a great option for investors who need cash to purchase a vacation property before they have secured long-term financing. Bridge loans and hard money both fall under this category.
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    Should You Buy Or Rent A Vacation Home

    Youve got a little extra cash and youd like to find a place to escape.

    Should you buy a property and build equity with the potential for rental income? Or should you rent a getaway with no fixed costs, maintenance or hassle?

    Vacation homes tend to be the kiss of death for most peoples financial plan, says Patrick King, certified financial planner at Transformative Financial.

    During the buying process the assumptions around expenses, rental revenue, taxes, insurance and property management tend to be wildly optimistic, King says. One kitchen remodel or a new roof could blow a hole in your return on investment calculations.

    But even if a vacation home does turn out to be a terrible investment, it might provide years of family enjoyment, and many consider it a labor of love.

    Heres how financial planners, homeowners and investors have approached the decision to buy or rent a vacation home.

    Real Estate Mutual Funds

    Our Rentals

    Real estate funds invest in REITs and real estate operating companies . REOCs are like REITs, but they dont have to pay dividends, so they grow much faster.

    Real estate mutual funds or exchange-traded funds are the simplest ways to invest in real estate. You allow a manager or even an index to choose the best real estate investment while you collect dividends.

    Even if youre a stocks-only investor, consider using real estate funds to get diversification while keeping the liquidity profile youre used to.

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    Harbor Springs And Bay Harbor Michigan

    Emmet County in Michigan has seen a surge of demand for waterfront properties since June 2020, and it’s showing no signs of slowing down, according to White. “The demand is incredibly high for those looking for a second home on the water, and both towns are prime destinations for vacationers and residents alike,” he said.

    These serene resort communities on Lake Michigan attract visitors of all ages year-round with their charming lakeside dining and shopping spots, golfing, fishing, and sailing opportunities, as well as their overall laid-back vibe. Fall foliage here is absolutely stunning, and when the first snow transforms the area into a winter wonderland, you can try snowshoeing, cross-country skiing, and snowmobiling.

    Recommendations To Build Wealth

    Explore real estate crowdsourcing opportunities. If you dont have the downpayment to buy a property, dont want to deal with the hassle of managing real estate, or dont want to tie up your liquidity in physical real estate, take a look at Fundrise, one of the largest real estate crowdsourcing companies today.

    Real estate is a key component of a diversified portfolio. Real estate crowdsourcing enables you to strategically invest in commercial real estate around the country. Fundrise is the creator of the eREIT asset class.

    Another favorite platform of mine is CrowdStreet. CrowdStreet focuses mainly on 18-hour cities where valuations are lower, cap rates are higher, and growth rates are higher. A long-term demographic shift towards lower-cost cities and states is underway. CrowdStreet is there to take advantage.

    Personally, Ive invested $810,000 in real estate crowdfunding across 18 projects to diversify my holdings. Further, I get to earn income 100% passively as I spend more time taking care of my children.

    Shop around for a mortgage. Check the latest mortgage rates online through Credible. Theyve got one of the largest networks of lenders that compete for your business.

    Your goal should be to get as many written offers as possible and then use the offers as leverage to get the lowest interest rate possible. Mortgage rates are at all-time lows. Take advantage!

    Filed Under: Real Estate

    Current Recommendations:

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    Use Professional Photographs Of Your Home

    When you list your home, you need to put on your marketing hat. After all, there is a lot of competition. You need to stand out.

    The most important selling mechanism you have are the photos you upload in your homes profile. People do judge a home by the photos. I know I do .

    The following is a simple set of tips on how to get the most from your vacation home listings photographs.

    a. Get professional photos: Hire a professional photographer or if the vacation rental website offers photographers, take them up on it. Poor lighting and low quality photos diminish your home and will hurt overall revenue. On the flip side, if your photos are well above average, you enjoy a benefit.

    The potential revenue of your listing is tens of thousands of dollars. Therefore, its worth investing a few hundred dollars on high quality photos.

    b. Tidy your home for the photoshoot: I dont suggest staging your home with furniture that wont be there when guests arrive. However, you certainly want to tidy up your home and make it look as nice as possible without being misleading.

    c. Weather: If at all possible, get photos taken on a sunny day. Rain doesnt sell. If youre renting a vacation ski rental, get photos when theres snow on the ground.

    d. Use plenty of photos: Get photos of the exterior and interior of your home. If there are nearby attractions, get photos of those attractions.

    What Can A Vacation Rental Do For You

    Tips on Renting a Vacation Home

    Whether youre embarking on a thrill-seeking excursion or looking for a quiet couples trip by the sea, vacation rentals are available in virtually every size and type. You can find cottages, cabins, lodges, houses, apartments, and more, all with a range of amenities to help you make the most of your trip. With a vacation rental, you can enjoy features like pet friendly yards or gardens, pools and hot tubs, outdoor grilling, and entertainment space, all in the comfort of your own home-away-from-home. Best of all, you can find rentals for virtually any budget, all with amenities that help you save, such as kitchens and entertainment features.

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    Why You Should Invest In A Vacation Home

    Buying a vacation home allows a homeowner the opportunity to enjoy a new city and become a seasoned real estate investor at the same time. Heres why and how to get started.

    The vacation home landscape has changed significantly since the arrival of websites such as AirBnB in 2008, and the rebranding of Vrbo in 2019. Not only has a spare bedroom become a cash cow, people are learning that second and third homes can yield the best of both worlds. Rather than paying for pricey hotels on vacation, a second home can allow a homeowner the opportunity to enjoy a new city and become a seasoned real estate investor at the same time.

    Although the flexibility of having multiple homes allows owners to pull off geographic arbitrage and unlock a variety of tax benefits, most people are intimidated by having another mortgage . But the reality is that homeownership is a highly lucrative venture and, in most states, really straightforward.

    Here are three reasons why you should invest in a vacation home, and three simple ways to get started today.

    Buy A Vacation Home In Southern Utah

    There has never been a better time to own a vacation home in southern Utah. Improve your quality of life while covering your mortgage, paying down the principle, while enjoying the benefits of owning a turnkey, professionally managed 2nd home and investment property. It can cashflow depending on the down payment, financing terms, uniqueness, and amenities selected. This is why UBVR is so invaluable to owners. We offer a wealth of knowledge and experience that will be what makes your property outperform other competition. Contact us below to get started!

    Southern Utah is a big tourist hot-spot. Millions of travelers visit each year to see Zion and Bryce Canyon National Parks. Purchasing a vacation home in southern Utah can be a great investment that yields great monthly rental income. Our team can help you locate the perfect property and set it up to succeed.

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    Where To Buy Vacation Home Property

    Looking to buy a vacation home, but not sure where to look? Location can be very important when it comes to vacation property, especially if you plan to rent out the home. The more appealing the location is, the more interested potential renters there will be.

    Here are some of the top vacation home counties in 2021.2

    Ready to buy your dream vacation home? Dive right in by getting started on refinancing for your mortgage and learning more about how to buy a second home.

    S For Investing In Vacation Rentals

    The Life Aquatic UPDATED 2019: 9 Bedroom House Rental in ...

    Before you even look at buying a vacation rental property, there are a few things you need to figure out. Thats because learning how to buy a vacation rental requires a special set of strategies.

    Fortunately, its not as difficult to start investing in vacation rental properties as many would assume. In fact, I have broken down the entire process into five simple steps that anyone with a good work ethic and a mind for due diligence can grasp. Ringing true for almost any type of real estate investment, the very first step is doing your homework before you take any actions.

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    Can You Make Rental Income From Your Vacation Property

    Banks are funny. They are much more stringent on mortgages for vacation and investment properties because they assume you require rental income to afford the mortgage. Meanwhile, youre thinking to yourself, I can afford the place on my own, but if I can get rental income, that reduces my credit risk as a borrower!

    Rental income is a great way to offset the ongoing cost of owning a vacation property during the 45+ weeks a year that you will likely not be there. The IRS tax laws even allows you to rent out your vacation home for up to 14 days a year without paying taxes on the rental income generated from those days.

    But at the end of the day, you must think like the bank and consider any rental income from your vacation place as a bonus. Only buy the vacation property if you dont need the rental income.

    Due to the pandemic, my vacation property Lake Tahoe was shutdown for one month during the peak winter period. As a result, I lost out on over $5,000 in rental income.

    Is Owning A Vacation Rental A Good Investment

    When investors follow the appropriate steps to buying a vacation rental property, they are more than likely to reap the many benefits this investment offers. The biggest payoff vacation rentals have is increased cash flow. Vacation rental platforms are a great way to generate income from a short-term lease, and if your property is in high demand, you will see even greater profits.

    The tax benefits associated with vacation rentals are also available to take advantage of. Your vacation home is considered a business if it is rented out for at least 2 weeks per year or more for tax purposes. This means that the rentals income will be taxed, but you can also write off many of your rental propertys expenses. You can deduct many items from your taxes, including utility costs, property management fees, occupancy taxes, mortgage interest, and more.

    Not only can you generate income by leasing out your rental property, but also you have the benefit of vacationing there yourself. If you ever decide to take a getaway, your vacation rental can be made available for your own personal use. You can even hold on to your vacation home to use as a future retirement home.

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    Make An Offer Using A Local Real Estate Agent And Lender

    Many vacation properties are in specialized local markets, so its best to find local real estate agents and lenders.

    Your real estate agent will clarify local transaction fees, taxes and commissions, as well as advise on local zoning and property rental rules. For example, the town of Sonoma doesnt allow short-term rentals for vacation homes, but other towns in Sonoma County do.

    In destination areas, real estate agent commissions can be higher and can also be seller- or buyer-paid, depending on the area. Only a local expert can advise properly. And, of course, they will structure your offer for you and negotiate on all facets of the deal that are a priority to you.

    Likewise, local lenders will be comfortable with appraisals and lending in rural areas. Appraisals are more difficult in less populated areas because comparable sales can be old and hard to find.

    If you follow these steps, your closing will be a snap, and youll be relaxing in your vacation home before you know it.

    Top featured photo from Offset.

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    Determine What You Can Afford

    Chula Vista City Council approves new rules for short-term vacation rental owners

    Before you can purchase a second home, its important to understand the costs you might face.

    If theres a mortgage, then there are expenses for principal, interest, taxes and insurance . However, the very nature of a second home can mean other costs, as well. If youre 150 miles from the property, for example, who will look after it? Who will check the property in the event of a storm? Will somebody stop by regularly to check for theft or vandalism?

    If youre thinking of buying property by the beach or in a forested area, look into the availability and cost of insurance before you buy. You cant get or keep a mortgage without required insurance coverage, so make sure its both available and at an affordable price.

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    Establish A Digital Presence

    Promote your vacation property on popular rental sites such as Airbnb and VRBO. On those sites, youre able to decide how long rental stays can be and the total fees and costs for potential renters.

    After approving a renters stay, connect with them via an email or online messaging system to keep them informed about the vacation property. Try an email template that will include important things to know before coming to use the home, as well as local go-tos and activities for the renters to try out during their stay.

    Why Should You Invest In Real Estate

    Here are a few pros and cons of investing in real estate:

    Pros Cons
    If you invest in physical property, you can control your investment. You could also have a totally passive investment that you dont need to manage. In a Great Recession type of event, prices can collapse and take down your entire portfolio.
    Can be a source of steady monthly income payments. With the amount of leverage required, even small price drops can wipe out your whole investment.
    Can reduce your overall volatility through diversification and lower price movements in general. If you choose to flip houses or personally own rental properties, it can turn into a career in itself and use up significant free time.
    Can lead to long-term wealth through the use of leverage. Up-front costs can make initial investments difficult. You need to save enough for the down payment and to cover cash flow shortages when there are vacancies.

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