Who doesn’t dream of owning a property on their favorite stretch of beach or a cozy mountain cabin tucked away in the North Georgia mountains? Well, now is the time to start seriously considering buying your vacation home that also doubles as an income producing property.
I remember my dad always telling me, “you’re doing things right when you’re making money in your sleep.” But how about making money in your sleep on a vacation home that you can use at your leisure while the mortgage is paid by someone else?
For everyone that owns a home already, you know you’re making money every year simply off of appreciation. Prime example … the average market report that I run for past clients in Metro Atlanta who closed 8 +/- years ago is showing an appreciation of approximately $190,000 from what they originally paid. Divide that by 8 years and you’re making $23,750 in appreciation per year, tax free. Break it down monthly, and you’re making $1,979 on average. But what if you had an opportunity to double that number by owning two homes, one of which is being paid for by vacation renters.
Here’s where real estate gets really fun. It’s the only investment you can live in, rent out, and enjoy. Let’s talk about the “Enjoy” portion of real estate. Many of our clients have turned to purchasing vacation homes in this tight inventory market as a way to make money while they’re sleeping AND have a beautiful property to enjoy at their disposal. Renting isn’t just for long-term tenants … you can make nice profits on vacation rentals.
Along the Gulf of Mexico, for example, most condos average anywhere from $35,000-$45,000 per year in rental revenue. In the North Georgia mountains, rental revenue can range from $20,000-$50,000 per year depending on the property size. It gets even better! If you purchase a vacation home as a second property, the down payment is only 10% compared to a 25% down payment when buying a home as a straight rental property.
If you’re considering purchasing a vacation home in one of your favorite seaside towns, along your favorite lake or in a mountain community, we can link you up with amazing agents if you’re looking out of state. Otherwise, if you’re purchasing a mountain property in North Georgia, we can personally help! It’s a fantastic way to make extra money each month, own property in a place that you love, and eventually retire in a home that’s fully paid for.
Where to buy… The beach or the mountains? There are different factors to consider depending on the location. For example, if you’re buying a beach condo, remember that the AC units will get worked hard due to the hot climate, furniture may need to be replaced more often because people are sandy and salty, cleaning costs might be a little bit more due to tracking in sand, carrying hurricane insurance, and significantly higher HOA dues. Beach condos tend to rent for far more per night than mountain homes, and you can capitalize on snowbirds willing to do 2-3 month rentals during the winter season.
For mountain properties, consider hot tubs breaking, erosion/drainage if the property sits on a steep hill, the difficulty of finding contractors in isolated areas, and most importantly, seasonality. Mountain homes tend to bring in the highest revenues in the spring, summer, and especially the fall. The dead of winter tends to be a little less attractive to city dwellers. Weather can play a role if the elevation is high enough for snow or ice. The great part about mountain homes is that most have zero HOA dues or maybe $600-ish or less per year if in a community. While they may rent for a little less per night than at the beach, not paying high HOA fees means you get to keep more of the profits.
A key question to ask is, are they selling furnished? The clients we’ve helped have been able to negotiate deals that include all furniture, dishware, TVs and linens. This is critical in order to make the property turnkey and instantly available for rental.
There’s never been a better time to pull the trigger on a vacation home than now! With interest rates so low, it only maximizes your investment long-term. We have the lenders who can provide loan guidance and all the connections across the United States for any vacation area that interests you. Give us a call, and we’ll guide you every step of the way!