I think we all do it. We’re on holiday in a fabulous vacation rental and decide this must be a great way of investing; reaping the benefits of rental and getting to use the place when we want. So, we spend time exploring the Multi Listings Site and browsing in realtor windows.
I was speaking with a Florida realtor recently and she said that her inquiries are always the highest in the winter when the snowbirds are on the ground and they often lead to impulse buys because they see a ‘bargain’ and want it there and then. Buyer’s remorse can set in very shortly afterwards when the consequences of managing the property from a distance become apparent, and the costs begin to pile up.
Flashback to two weeks ago and I was in the Bahamas doing exactly that. There was a piece of property for sale next to the place we were staying and I got to fantasizing about building a house just like the one where we were staying. But….I have been there and done that before which is how we bought our first place in Ontario. It wasn’t such a bad buy but more research would have had us making wiser decisions.
We’ve bought six more properties since those early days and this is what I’ve learned:
There will always be another bargain
Even if that cute place on the beach looks perfect and the realtor tells you there are others sniffing at it, leave it alone until you have done all your due diligence. This may mean you lose it, but this is not a pair of shoes you can relegate to the back of the closet if they don’t feel comfortable after the first wearing. Once you are burdened with property taxes, insurance, and other fixed and sometimes unrelenting costs, you can’t take it back and change your mind, without the potential of considerable loss.
The time you want to vacation is usually high season for rentals
When people get excited about buying abroad, they are often there in high season. It’s unlikely they have traveled to the Bahamas in hurricane season, or Colorado in the summer; the excitement is coming from being there in prime holiday time which is precisely when the best rates are charged. So, buying a home and planning on being there in the height of the season is not a good economic decision. Plan a trip in the off-season to look at the area. If you still love it, then that is the time to plan to buy a vacation rental and make your property offers.
Keep emotions out of any decision-making
That wonderful holiday feeling as you relax on a sun-drenched dock, take a cocktail on the patio, or look out over the lake or ocean needs to fade before a buying decision gets made. Otherwise practical issues will be overlooked and the heart takes over. Just make sure you engage your brain and give rational thought to all the costs and benefits.
There is more to the cost than the purchase price
It’s important to factor in all the costs and this often gets skipped in the tropical warmth of a Caribbean sunset. “We can afford this” you say as you look at the price of the house that’s for sale down the road. Once the additional costs are introduced that initial figure can grow another 20% or 30% or more. Those costs include:
• Furniture and furnishings – and the cost of importing them if you are on an island or in a South American country. There’s no Ikea in Costa Rica!
• Maintenance – if you are not there to do the changeovers you’ll have to hire a property manager. Then there’s the pool maintenance, someone on hand to fix the plumbing when it goes wrong (it will), do the yard work, change the light bulbs, and on and on. Do not underestimate this cost.
• Insurance – no joking about hurricanes here; in high risk areas the insurance costs can hurt.
• Electricity costs – these can be horrendous in certain countries and the service may be so erratic you need a generator anyway.
• Marketing – There’s no way you can list a vacation rental these days and have crowds beating a path to the door. You have to fight for them every inch of the way, which means time and money spent on listing sites, web sites, blogs and social media.
If you are still eager to buy after all this, it’s time to get going on the research and I wish you luck. It’s exactly what I am doing now that I am back from the Bahamas and still as enthusiastic about buying as I was when I was there. I’ll keep you updated on my progress and would love to hear from anyone that is doing the same.