8 - Renting vs. Buying a Vacation Property
In this episode of Get Real Wealthy Season 2, Quentin discusses renting versus buying a vacation property.
Quentin says that over the past few months, there have been a lot of vacation properties being rented out in the Halliburton area, where a few years ago, there were for-sale signs everywhere. So, why would you buy a vacation property? He says that if one of your goals was to own a vacation property and go ahead and buy it. However, if you're just looking to utilize the vacation property, there are a couple of different options. First, how often are you actually going to utilize the actual property? Look at the number of days that you were actually able to go to the cottage versus renting the same type of cottage in the same area. This will give you an idea of whether the expenses owing such a property are feasible or not.
He adds that oftentimes, the rental vacation properties barely cover the expenses and don’t offer any significant cash flow. It is different for people who are in the business of short-term vacation property rentals. The other thing is can you get a better yield on your money in a different asset? Sometimes it makes more sense to invest money in your business or in a rental property in a different area that has good cash flow and good appreciation.
Quentin adds that when it comes to vacation properties, there are other types of investments as well like new fractional ownership properties, where there are 12 owners of the property, and each one gets assigned five weeks, where you can go and visit. However, it is not an investment as it does not give a yield that you can get on an investment property with cash flow and appreciation in a good solid investment area. As for timeshare, he says “Get it off the secondary market you can probably pay for like the cost of the paper that it's on like $1 And you just take over the payments. Don't buy a new timeshare.”
In conclusion, he adds that to learn about whether your property would make sense as a vacation rental, you can use resources like AirDNA, to get an idea of how much time a certain area is being rented out and the prices that they're going for. This will help you make an informed decision.