One of my goals is to find a vacation property within driving distance that my family can enjoy. But, buying a second home is rarely a smart financial move. You have all of the cost of a primary residence, and only get to enjoy it for a short time. So to capitalize on on my future purchase, I sought out expert advice online and my family and I hit the road in search of that perfect beachfront getaway. Here's some of what I've learned:
SCOUT IT OUT:
The best part of this quest is definitely at the beginning! You get in the car and hit the road, scouting out places you'd like to slip away to in the future. When you find a spot, just make sure lots of other people love it too, or there's really no point in going any further.
If you aren't free to look in person, perhaps set aside an evening with your family and seek out hot spots online. It's a great way to get the kids involved, and you can cover more ground. But once you've locked in a location, it's time to get to work and remaining tasks are admittedly more fiduciary, than fun.
BEFORE YOU BUY:
According to biggerpocketss.com before you buy, consider your total monthly expenses for that vacation property. Make sure you have enough to cover the extra monthly bills, even if you don't bring in a dime. Unfortunately, some people end up losing money - or worse yet, their property because they don't plan for the most common, worst case scenarios.
Biggerpockets sites two examples - a large, unexpected repair or a slow season. But even flooding and surprise storms like we've seen in Texas and Florida can create a negative annual return, and goodness knows those property owners had no control over nature.
WHAT YOU CAN CONTROL:
According to Investopedia.com, what is within your control is deciding the best way to fund your purchase in advance. Even if you are considering a cash deal, they suggest that you do some research first which may help you better leverage your money.
Check out the interest rates offered by local lenders in the area where you intend to buy. Those lenders may provide numbers that make sense - creating a "good debt" scenario. That's a loan where your renters pay your mortgage and all of your expenses, and you still have some positive cash flow at the end of each month.
PLAN YOUR BOOKINGS:
One way to build rental income is through consistent and repeat bookings. The advice I found on how to achieve this, is to set up an online calendar which only accepts reservations for a week or more. Two weeks, if possible, during peak season. I saw this in action when I was scouting for properties in North Myrtle Beach and the surrounding area.
The calendars were color-coded with red indicating bookings and green available. The best places were solid red- months in advance. Many units had loyal families who blocked out multiple weeks at a time and returned every year.
Other time periods were marked "unavailable," and I assume the owner reserved those periods for personal use. As far as calendars go, I definitely want to be in the red, and I'm sure you do too.
STAND OUT FROM THE COMPETITION:
Naturally, proximity to the ocean or at least a great view are essential for success, but beyond that I found that interior decor, amenities, and nearby bars and restaurants and quick response to problems, seemed to make a big difference too.
Most relied on management companies to troubleshoot smaller issues, while others dealt with guests directly.
As Investopedia.com correctly reminds us, your guests only have a week or two to enjoy your property, and a leaky dishwasher or dead TV can sure put a damper on any experience. I know that firsthand because, at one rental house, a backfiring golf cart left us stranded several streets over and while it didn't ruin our stay, it seems a quick double check of equipment before our arrival might have had us on the beach, instead of roadside trying to flag down assistance.
MAKING AND MARKETING A GREAT PROPERTY:
Once your support team begins to take shape, it's time to let the world know you are out there. Experts suggest that you hire the best marking team you can find in that area. It might be your local real estate broker or property management firm. Those are folks who have probably mastered social media and sites like Airbnb and HomeAway. I tried both Airbnb and HomeAway domestically and internationally to see how they work from the customer's point of view.
As you set up your LLC, or however you are going to deal with accounting, don't be surprised if you run across city resort fees, in some locations. Do your homework for the area where you want to purchase, so that you can accurately calculate your monthly cash flow in advance.
If you've selected a hot area, there will be hundreds if not thousands of options for your potential guests to consider. One of the things that stood out to me at the best properties in Myrtle Beach and Virginia Beach was the attention to detail.
Creating an attractive, calm and tastefully designed nautical decor is just the beginning. Several of these owners had anticipated every possible need or desire a large family might have while on holiday.
At one property the kitchen came fully stocked with everything from a crock-pot to crystal! Frankly, I'm not sure who is using a crock-pot on vacation, but if they want it, it's there.
They also supplied, spices, cooking oil and coffee, along with a friendly note offering directions to a nearby grocery store. That same owner created two extra large storage closets at each end of the house, which contained items for babies, infants, and children of all ages. The furniture and appliances were high quality and up to date. This property happened to be dog-friendly, and the owner was smart to install flooring that pups couldn't easily damage.
CLEANING and TURNOVER:
During peak season you might have one guest checking out in the morning and a whole new family coming in later that afternoon. I saw that happen with Air b&b overseas and it caused problems for the cleaning crew.
To avoid making your incoming guests wait, experts suggest that you have a reliable cleaning team ready to roll within hours after one set of guests depart.
We took great satisfaction in leaving each property in better shape than we found it and earned 5-star guests ratings as a result. I'd like a similar rating as a vacation destination and return the high ranking to my satisfied guests when they check out.
I'll keep you posted as my search gets underway. Who knows? Perhaps you'll be one of our first visitors.