One of the greatest benefits of owning a rental property is its wealth-building capabilities — other people are paying for your equity in the property. With the right location, your earning potential is great.
Earning higher rents. Owning a rental house or condo in a high-demand area likely will command excellent rental fees in peak season. Heavily traveled destinations are often booked up months in advance. This very strength, however, means that you’ll likely pay top dollar to purchase such a place.
Do the math. Before purchasing, figure out how much money you’ll need to charge to cover your mortgage, insurance, taxes and expenses, plus some extra for a passive income stream. Check with nearby property management firms to find out if the market will support the rental fees you would require. Also inquire about their fees, should you choose to hire them. It will eat into your bottom line, of course, but save you the headaches of advertising, leasing and maintenance issues.
Take into account the off-season. You may be able to easily book your rental during peak season, but what is the off-season like? Can peak season earnings carry you through slow times?
Wear and tear. With a constant turnover of clientele, vacation houses and condos quickly show wear and tear. This will cost you.
Logistics. How will you handle cleaning services between renters, key turn over, and hurried maintenance or repairs so that incoming renters don’t have to deal with problems created by previous tenants.
Insurance matters. Strong liability insurance is needed to protect you should a renter become injured on your property. You’ll also likely have higher homeowners insurance if your rental is located in a hurricane zone, for example.
Me time. If you intend to reserve some time during the year for you and your family to enjoy the place, remember to figure than into your income stream.
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