Got clients considering the purchase of a vacation home and they're worried they can’t afford it? The good news is—vacation homes can also be great investments, enabling your clients to earn a profit in rental income while having a place to “escape” and call their own. With sites like Airbnb and HomeAway, vacation rental homes are more popular than ever. Not everyone wants to rent out their vacation property, but for those who do, it’s a smart way to offset the costs of owning a second home. There’s no doubt, it’s a major investment with several factors to consider. Fortunately, your client has you by their side to help and advise them through the process. It’s easy for buyers to get lost in the excitement of a new home in that “dream beach location” or "snowy mountain cabin with views," which is why we’ve put together a few good tips to help you assist them in their search and ensure they make the right investment.
- It’s not just a vacation home, it’s a financial investment. Don’t let your clients forget that this vacation home isn’t just one big vacation. Help them establish a solid budget and make sure they stick with it. Purchasing a second home is a major decision and can have a big effect on long-term goals (e.g., retirement). Remind them to calculate the costs, including having another mortgage, property tax, insurance – the list goes on. Important details such as making sure the furnishings are durable and consistent with the rental rates are also important for them to include in their budget. Having them create a financial plan is a great start.
- Location matters, and not just for them. When helping your clients pick the right location, it’s important they consider a location that will be ideal for renters as well. Proximity to transportation (e.g., trains, airports) is a big factor in how appealing the home will be to others. And after all, it’s their rental income that will be covering much of the home's costs. In addition, suggest that your clients spend at least some time in the area during different seasons throughout the year so there are no surprises for them or their renters.
- Purchasing a home with another family or friend has its positives and negatives. The positives are that purchasing a home with family or friends can reduce the financial burden and your client can spend some fun days together with them at the rental. On the other hand, it can get complicated when making big decisions such as when they will be using the house, splitting emergency costs or repairs, and what happens when someone wants to sell. Recommend that they set expectations between all parties and put it in writing to mitigate these types of issues.
- View it as a new home and a business. Unlike their primary home, your clients will need to view their vacation rental home as somewhat of a business. This means having a rental business plan and determining whether they will hire a management company, rental program or market it themselves on sites like Airbnb or VRBO, as well as deciding how they plan to receive their rental payments (e.g., PayPal, Stripe).
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