Dawn Sabato: When it comes to investing in vacation homes, knowledge is key

There are many ways to invest in real estate. Although markets fluctuate, real estate is generally a wise and safe enterprise to explore – an industry that tends to typically right itself even in the face of evolution and challenge. Growing with incredible haste, vacation home properties have quickly become the favored path for all types of investors. Entrepreneurs, families, retirees – anyone can viably expect a gain from thriving trend, and it’s much more attainable than many believe.

As in any business venture, knowledge is key. An early awareness of the processes and potential pitfalls of real estate investment can save a lot of headache and confusion later on. It also stands to mention that the purchase and ownership of a vacation home property does differ from strictly residential or commercial real estate. In essence, you’re dealing with a commercial scenario in a residential setting for a commercially residential use – if we are being entirely literal – so the rules in these situations are entirely unique, and your interests and concerns should be as well.

Know Your Markets – Know Your Opportunities
While it’s certainly true that people travel everywhere, there are geographical markets that are consistently stronger than others. To maximize your investment, you should strive to obtain a home in an in-demand region. Foreign investors from China, United Kingdom, Canada, Mexico, and India all continue to find lucrative properties amongst the most popular tourist destinations in the United States. Florida is the only U.S. state to remain in the top five foreign buyers’ markets year after year. The state has topped its own visitor records for the last six years, reaching 113 million in 2016 (with 68 million setting their sights specifically on Orlando). Forbes also named Orlando the third best location for investors just this year. With well over 10,000 private homes already in the marketplace, the Orlando region is centralized between diverse beaches, countless lakes, and an array of theme parks and attractions, with alluring temperatures virtually all year long.

Orlando has recently seen the growth of an innovative new “horizontal hotel” concept, originating with Providence Golf Resort and Country Club – a residential community/vacation village with single and two story, 4 and 5 bedroom homes and first-class onsite amenities like pro-grade golf courses, dining, water park, and community events. The rise in inclusive, luxury resort accommodations just minutes from world-renowned theme parks and entertainment has only added a layer of appeal to the Orlando area, and luxury homes like those in Providence can be purchased for under $300,000 USD, while easily renting for over $200 USD per night. Contempo Vacation Homes in Davenport, Florida saw the Providence subdivisions of Rosemont Woods and Victoria Woods to fruition from concept, alongside Virgin Holidays. As Virgin Holidays’ preferred Orlando-area supplier, Contempo sees an average of 80% occupancy in these homes, with guests flocking to leave positive reviews on their stays. All of these tidbits combine to show an appealing investment opportunity with less risk, and better reward potential. Look for positive attributes and red flags when comparing markets and options!

The Selection Process – Consider Your Priorities
It goes without saying that you will want to align yourself with reliable, experienced professionals throughout the entire process from search to closing – and quite possibly beyond! Your licensed real estate agent is not only obligated to act in your best interest, but they are bound by regulations that protect all parties involved in any transaction. This is a significant purchase, and one that should only be trusted to those with in-depth knowledge of the local market and regulations.

When considering vacation home options, there are generally three categories to select from: pre-construction, new inventory/spec homes, or pre-owned/resale. Pre-construction affords many options to the home buyer in terms of lot selection, model, color schemes, and upgrades. Since the home has not yet been built, you have the opportunity to make it very much “your own”, but you will also have to wait for the home to be built before you start earning income on rentals – so this may not be the best option for a vacation home buyer looking to earn quickly. New inventory may not allow for as much customization in features and style, but it will still provide a new home – usually with a lot less wait time to begin using the property. In freshly-built communities, you can also often find heavily discounted homes in this category because builders will be highly motivated to get the remaining homes sold as the development completes. A pre-owned opportunity is not one to shun, however. Though there may be a need for updates, repairs, etc. in some cases, this could be quite worthwhile if the home is located in a prime community with high demand, for example.

Sealing the Deal – Where To Go From Here
Upon selection of a home, the next step is to make an offer. If accepted, a contract for sale is drawn up, and purchase deposits are made. Deposits may vary based on the type of home you purchase and other factors. Foreign nationals are usually required to pay a minimum of 30%-40% down payment and the balance in mortgage. If you are in a position to put down more, you will secure a better interest repayment rate. Once buyer and seller commit signatures to the contract, and monies have been paid, completion is generally just a matter of awaiting the closing date to finalize the process. In the interim, you have a lot to think about in terms of your plans for use of the home!

A high percentage of vacation home owners are not local to their vacation home. Obviously, this can make the business of maintaining and renting that property a daunting task, to say the least. Among other aspects to consider, there will be maintenance and repair issues, housekeeping, pool upkeep, preventative pest control, and of course – the actual process of renting the home as travelers book it! If that sounds like a lot, that’s because it is – and it is even more taxing from thousands of miles away! The solution to this is professional property management. A quality property management company should be qualified to handle all aspects of your home’s care and maintenance, as well as keeping it marketed and rented – exchanging your burdens for peace of mind, while seeing to it that your investment has a real potential for returns

Don Wherrett is the Founder and Director of Contempo Vacation Homes. He offers insightful, but simple advice gleaned from 40 years in the travel and tour industry. “Find someone you can trust. Look for longevity, proven track record, home owners and customers speaking on their behalf in praise. Remember to seek figures for facts – not a pitch from a salesman’s view. The salesman is done at closing. We are there ongoing as property managers, so we can’t afford to be anything but truthful and upfront”.

Dawn Sabato
Dawn Sabato

Property investment should always be viewed as a long term investment. A period of two or more years is recommended to maximize profit, build equity, and cover the associated costs of selling. Your return on the initial investment will come from property appreciation, rental income (short or long term), savings on your own accommodations when visiting, or some combination of these methods.

Dawn Sabato,   Contempo Vacation Homes

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