Waterfront Investment Properties & Short-Term Rentals

tThe idea of purchasing a waterfront vacation rental property is arguably one of the best investments you can make. The ability to have your own vacation getaway, residual income opportunities, tax writeoffs and assets for the future are all great reasons.

Purchasing any vacation rental property requires a solid understanding of local markets and projected revenue. Here are some things that every prospective vacation rental buyer should know before they make an offer and begin the process of a shortterm rental property.

Location – Location – Location

Location is the one thing that you can’t change in real estate, but ultimately it is one of the most important decisions when purchasing a vacation rental investment. Your impending purchase must be in a pleasant and desirable location to attract guests easily. Take your time to analyze vacation rental trends in the location you’re searching, and understand the local amenities that are available to your guests. Waterfront properties in Texas have historically shown incredible appreciation. One thing you can contribute that to, is that they can’t make more of it. Lakes and beaches only have so much waterfront and the land is typically where the majority of the property value lies. Take notice, if the property is on open waterfront, a cove or a channel. Remember, you can always update and change the exterior and interior of the home but you can’t change the land.

Make sure to connect with a local experienced Realtor® that can help you research a comparative market analysis. A comparative market analysis will give you the best insight to the most recently sold similar properties in the area you’re looking to purchase. In addition to familiarizing yourself with a prospective area, your Realtor® can easily help you identify a rental price range and begin to formulate the income you can reasonably expect from the property you are interested in as well as estimate your expenses.

It is vital to your success that you understand the ebbs and flows of vacation rental demand in your prospective purchase area. For example, if your purchase area is in a resort lifestyle setting, understanding the “seasons” for vacation rental demand is of most importance. It may be worth considering in your slower months to offer discounts for multimonth renters, so your property isn’t sitting vacant.

The best way to finance an investment property depends on each person’s situation.

In a competitive market, cash is king, however taking your cash out of other investments doesn’t always make the most sense. Sometimes there are options to take a Line of Credit against other investments. When you do that, you become a cash buyer and even avoid lender closing costs.

Taking out a mortgage is another great way to finance an investment property. The rule of thumb is 20% down, but some lenders who know the specific market you are buying in know how to get creative and can sometimes help you into a lower down payment. Shop around and don’t give up if one lender can’t make it work.

In most situations, vacation rental investments will collect monthly income and begin building equity. While the investment opportunity sounds glamorous and might make you want to jump right in, do your due diligence first and have a plan. With the right preparation you could find your investment paying off for years to come.

Kathleen Kokernot

(830) 265-2818 kjluxury.com kathleen.kokernot@sothebysrealty.com

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