If you're looking for a way to supplement your income, then purchasing a home to rent as a vacation getaway for others could provide you with a reliable stream of cash if you choose the right home and location. However, owning a second home is a challenging undertaking that shouldn't be entered into lightly. Here are two questions you should ask yourself to ensure your ready for this particular adventure.
Can You Afford the Expenses Without the Income?
The first thing you need to determine is whether you can afford the mortgage and upkeep on a second home without the benefit of the rental income. There are two reasons for this. You will be responsible for paying all these costs regardless of whether you have anyone renting the place or not, so you need to ensure you can comfortably pay them; otherwise, you may end up having your second home foreclosed on.
More importantly, though, it may be harder for you to get approved for a second mortgage to purchase the home. Strangely enough, banks will often have more stringent credit requirements for people purchasing investment properties and require them to show the home will produce enough income for the investor to pay the mortgage. If you can qualify for the second mortgage without the benefit of the rental income, you can avoid this issue and get approved easier. You can contact a vacation rental company, like New Spirit Vacation Homes, for more information.
Who Will Manage the Property?
The second thing you need to consider is who will manage the property. You can save quite a bit of money by doing it yourself. However, this can be difficult if you don't live near the vacation the property or have other obligations that limit the amount of time and attention you can spare for the project.
Alternatively, you can hire a property management company to deal with any and all issues associated with locating renters, maintaining the property, and collecting payments. While this will leave you free to focus on other things, you'll have to fork over up to 12 percent or more of your monthly rent to pay for the service, which can eat into your profits.
It's important to consider your available time, the type of lifestyle you want to maintain, and your budget when determining whether owning a vacation rental property really fits your life.
For more information about owning a vacation property or help locating a second home that would be perfect for your investment plans, contact a real estate agent.