Vacation-home salespeople dangle the lure of rental income in front of buyers like a fresh worm in front of a hungry bass. So it’s no surprise that in a survey by the National Association of Realtors, 92 percent of vacation-home buyers said they planned to rent their property within 12 months, and 76 percent said the potential for rental income influenced their decision to make the purchase.
What’s more, many pre-retirement-age
folks are taking the opportunity to purchase a high-end second home at a more affordable
price now and rent it out until they retire.
Please don’t buy a
vacation home thinking it’s a great addition to your real estate rental
portfolio. I have never seen one that was. Buy it because you want a nice place
to spend some time. Any rental income should be considered extra cash to help
offset your expenses.
If you think this is
for you, check the HOA’s rules to ensure short-term rentals are allowed. And
don’t forget that there may be expenses that you don’t have with your other
rentals, such as hotel-occupancy taxes, maid service, and management-company
fees. Also your insurance company may require special liability coverage renting out a
luxury property.
Gonna go in with some friends on the deal? Maybe you’ve
taken vacations with them, had a great time, and get along well. What could
possible go wrong?
A lot … for instance who will use the home and when. Can
relatives or friends of your friends spend time there? What about décor? Will one of you want contemporary while another wants rustic?
Most importantly, though, how well do you know your
friends’ financial situation? How good is their credit? Could you count on them
to come up with the bucks for maintenance and repairs?
Better have everything in writing — kind of like a prenup — so you don’t get stuck paying the bills. While you’re at it, include a provision on what happens if one of your friends wants to sell his or her share. You sure don’t want to end up with a stranger as a new partner.
Better have everything in writing — kind of like a prenup — so you don’t get stuck paying the bills. While you’re at it, include a provision on what happens if one of your friends wants to sell his or her share. You sure don’t want to end up with a stranger as a new partner.
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