Being at the beach these last few days inspired me to write this post. Every morning my husband, daughter and I have been going for a nice long walk. On our walks we’ve been seeing lots of for sale and for rent signs and it’s been sparking conversations about rental properties and vacation homes. While we are fortunate enough to have a beach house in the family for us to always visit for free, having a rental property has been long-term financial goal of ours. It’s not something we actively look for, but it is something we talk about fairly often and occasionally look into.
The thing is, we are torn between what kind of rental property we want. It’s a dream of mine to have a vacation home in Charleston, South Carolina; however, Charleston real estate is pretty darn pricey. Sometimes we toy with the idea of buying a property there as a full-time rental, covering the mortgage, expenses and then some, and having it become a vacation home for us once the mortgage is paid off. The problem with having a property in Charleston, besides how expensive it is, is that we would have to hire someone to manage the property for us since we live 800+ miles away.
So, realistically, we think our first rental property should be one closer to home that we can be more actively involved in. New York real estate is also expensive, though, especially Southern New York where we live, which is why we are also considering buying a rental property near our alma mater, to rent out as off-campus housing for college students.
Rental properties are a great investment for a number of reasons. They can provide excess cash flow, have the potential to appreciate in value and create tax incentives/deductions. Real estate is a good way to diversify your investments, as well. And while a rental property can be a good investment, there are lots of possible negatives to them. For example, it is your job to maintain the property, even though you are not the one occupying it (unless it is a condo, then the condo association generally covers exterior maintenance, while you are only responsible for the interior). There is a chance you will have some vacancy at times and, therefore, no income. The property value doesn’t ALWAYS appreciate and could possibly even depreciate. So, if you are considering buying a rental property, be sure to take all the good and bad into account before making a decision.
Vacation homes, on the other hand, generally are not purchased with the intent of generating passive income. You could buy a vacation home and do short-term rentals to cover expenses for the year, though. This is something that is appealing to me because why not rent out the place and make some extra income if you won’t be using the property at that time anyway? The only downside to renting out a place that you also plan to vacation in is that you probably won’t want to leave your things in the house when it is occupied by strangers. My husband’s family beach house is filled with lots of pictures of them, meaningful trinkets, a stocked alcohol pantry, clothes and other things that make traveling here more convenient. This would probably not be a good idea if they were renting it out.
So, to sum this all up, one day, hopefully sooner rather than later, we WILL own an investment property of some sort. But until that day comes and I can share my experiences, check out these blog posts from some fellow PF bloggers!
How to Attract the Best Tenants for a Rental Property – Life and My Finances
Criteria and philosophies: rental properties – FIRE with Family
Purchasing a Real Estate Investment – The Heavy Metal Money Blog
My new investment property with 15% expected annual return – Freedom Thirty Five Blog
10 Enchanting Yurts For Rent On Airbnb – I Like to Dabble
Get Started Investing in Rental Properties – 30Sum
Do you have a rental property or vacation home? Share your thoughts below!
Good luck with finding the right deal and getting started—you’re going into it the right way! Research and form your priorities!
Cool post, Courtney! And thanks for including our article on tenant selection!!