By Robyn A. Friedman
Are you in the market for a vacation home? Whether you’re looking to ski in Aspen, sun in Maui or shop in Manhattan, you need to do your due diligence to ensure that your vacation home will also turn out to be a good investment.
“The biggest mistake that people who buy for their own use make is that they don’t consider the other side,” says Christine Karpinski, author of How to Rent Vacation Properties by Owner: The Complete Guide to Buy, Manage, Furnish, Rent, Maintain and Advertise Your Vacation Rental Investment. “They think, ‘Oh, it’s just for me. I’m not going to rent it.’ But circumstances change.”
Karpinski says that during the recession many people were able to save their vacation homes by renting them out. “I would never buy a second home that I couldn’t rent,” she says. “That’s your safety net.”
Other tips for buying a vacation home that’s also a good investment:
Location, location, location also matters for vacation homes. A house located a mile from the beach may be cheaper, but that distance can also affect your rental and resale values.
Check out the local rents before you buy. “Make sure that the property is capable of earning rents that would cover its carrying costs — or at only a small loss,” says Jeffrey A. Kahn, a real estate agent at Macken Realty in Fort Lauderdale.
Purchase someplace you actually want to visit. Even if you buy only for investment, you still need to visit the property regularly to ensure it’s properly maintained.
Make sure you can insure the property at a reasonable cost. Flood insurance, for example, can increase a property’s carrying costs.
Consider alternative property types, such as hotel-condominium units, which are making a comeback in many markets. “They are very well suited for people who want to use it part-time and want a higher-than-average return when they are not using it,” says David Staples, director of sales for SLS Lux, a project in Miami that includes 450 condominiums and 84 “designer suites,” a creative new name for hotel-condominiums. Staples says that while hotel-condos were not the best investments in the past, that’s now changing. “Hotel brands are getting more competitive,” he says. That means that unit owners might be paid more if they place their units into the hotel’s rental pool.