For many investors - even first-timers - purchasing seasonal properties can be lucrative. But while it may seem like a good thing to earn the bulk of your income over a short period of time, there are factors you need to take into account to ensure the investment is viable.
Property Types: There are several types of seasonal properties, each with its own investment potential. The common theme is the seasonal nature, which implies that the bulk of your income is earned over a few months. Unfortunately you also will incur year-round expenses such as insurance, property taxes and maintenance.
If you are investing in a property in another state, ask your real estate agent to refer you to an experienced local agent. He or she can provide you with valuable information on the operating season and likely will have contacts with insurance and financing companies that are familiar with the programs and services available to investors.
Insurance: Insurance companies may charge an additional premium on a seasonal property that is unoccupied during part of the year. Unoccupied seasonal properties are frequent targets for break-ins, as it could be weeks or even months before the owner discovers a crime has been committed. Some companies may offer a discount if the property has a monitored alarm system.
Financing: Investment in seasonal properties often requires creative financing, particularly when purchasing a property during the off season. Owners will often list the property during the off season, which ensures they can keep profits earned during the peak of operations. Lenders may require a larger down payment before they will extend financing on a seasonal property, as the investor may have little or no income until the operating season gets under way.
Access: Some seasonal properties have limited access. Remote northern properties can be difficult to reach once the snow falls. Isolated lodges and resorts, which are accessible only by floatplanes or off-road vehicles, can be even more difficult to access. This creates added expenses when repairs or maintenance are required; you'll need to factor in the property's isolation when considering the costs of upkeep.
Maintenance: Maintenance on a seasonal property is a tricky subject. In some climates there is a limited period in which exterior maintenance can take place. And while it makes sense to hire contractors during your operating season when your income is at its peak and you can supervise, customers often expect a discounted rate for the inconvenience of dust, noise and odors caused by the work. Your real estate agent can recommend an experienced property management company to help you keep the maintenance inconveniences to a minimum while you maximize the return on your investment.
Bargain Hunting: Seasonal accommodation properties, such as campgrounds and some motels, can be purchased for a reduced price during the off season, but depending upon the climate, you may still incur heating and maintenance costs even with little cash coming in. This is often offset in the peak season when rates can be increased accordingly. An experienced investor with a comfortable cash cushion can benefit from the reduced purchase price.
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