After the last year and a half, a lot of Americans are looking to get away. This has resulted in more and more people considering the possibility of investing in a second home for vacationing and/or renting out. While there are certainly significant benefits to investing in real estate, choosing a property that brings a profit and provides your family with a pleasant getaway requires you to do research and strategize.
It can be a complex process, but as long as you prepare and make good decisions, you can land the perfect vacation home for your needs. To get off to a strong start, check out these tips from Ric Davis.
1. Determine If You Could Live There Permanently
The first step of finding the ideal vacation property is choosing a location. If you plan on spending any time at all at your investment property, it’s important that you can picture yourself living there for prolonged periods of time. Plus, one of the perks of getting a second home is that you could move there if life throws you a curveball.
2. Know Your Area
Once you’ve pinpointed a location for your property, or have at least narrowed it down to a few, research the area thoroughly. In Los Angeles, for example, the median home sale price was $950,000 in December 2021, up 13 percent year over year, and sold just 42 days after being listed. Get to know the crime rates in all the neighborhoods, and figure out what local attractions are offered.
Also, research the rental rates, occupancy rates, and other relevant information that can help you determine which neighborhood will provide you with the most potential to make good on your investment.
3. Consider the Financial Implications
You need to know where you stand financially before investing in any type of property, and you need to have a workable budget in place. If you haven’t done so already, create a budget that includes your plans for an investment property purchase. Remember that you don’t want to make life hard on your household now or in the future. Moreover, BiggerPockets suggests analyzing each property to estimate the operational costs and profitability. You may even consider renting out your vacation home to others when you’re not there to generate some extra income.
Furthermore, consider the costs of any improvements or upgrades that the property will require. For instance, if your vacation home needs a fence installed, keep in mind that the average homeowner spends between $1,667 and $4,075 for such a project, according to Bob Vila. Be sure to find several different contractors so that you can compare their rates and client reviews. And don’t consider any candidates unless they are licensed, insured, and have knowledge of any underground utility lines that could pose a problem.
4. Start Saving Today
Even if you haven’t laid out all of your goals and strategies yet, it’s safe to say that the sooner you begin saving the better. Create a savings fund that you don’t touch for anything other than property-related expenses. And evaluate your budget to determine how much money you can contribute to your savings fund each week or month.
Getting a loan for an investment property is in many ways different than getting a loan for a primary residence. For instance, you will be required to pay at least 20% of your purchase price as a down payment. Of course, the more you pay down, the better off you’ll be in the long term. Focus your efforts on building a solid down payment.
5. Get a Good Agent
Finally, working with a top-notch real estate agent will make all the difference when it comes to purchasing your first investment property. An agent like Ric Davis can help you navigate the process from beginning to end. This includes choosing the right neighborhood, finding a property that will best suit your family’s needs, and even negotiating with the seller.
You want to get away—we get it. One of the best ways to give yourself and your family the perfect vacation spot is to invest in a second home. But it’s important to approach the process the right way and to make good decisions with each step. Along with considering the tips above, keep researching real estate investment strategies so that you can put yourself in the best position to close on the home of your dreams and strengthen your financial standing along the way.