A Home Away From Home…and a Home to Make Some $$$
**A note from Liz which inspired this post below**
In our June post, we touched on the pros and cons of owning a condo v. house v. multi-unit in the city. The pandemic, coupled with historically low interest rates, not only created an influx of buyers looking to move to a new home with more space but also created a demand for second home purchases. Whether it was the buyer seeking out a vacation home to gather with loved ones, the individual who could now work-from-home anywhere, or the savvy investor realizing the financial opportunity for a short-term rental, vacation home sales rose rapidly and were up 33% between April 2020 and April 2021 (CNN Business).
Let’s focus on the first opportunity brought on by the pandemic: Purchasing a second home. There are many reasons to purchase a second home, and during the pandemic, the desperate desire to be in a different location for a few weeks or a few months for work or fun moved front and center. With cities going into complete lockdown for part of 2020, non-essential businesses, both large and small, had to pivot to a work-from-home (WFH) system which provided opportunity for people to WFH in the mountains, on a boat, and at the beach.
With the low interest rates, people could afford a second home more easily, and those with cash, went all in on their new abode without a mortgage. Increasingly more people had a place of their own to travel to when they needed to get away even after the world started to “open back up”. Even now, many non-essential businesses have encouraged their employees to continue working from home and only come to the office when necessary. With mask, vaccine, and Covid testing mandates still in place across the country, working remotely still makes sense, and it can be in the comfort of your own home or your home away from home.
According to AirDNA, the U.S. also witnessed a spike in short-term rental occupancy from May to September 2020 and hit an all time high of 70% occupancy in June 2021. For the same reasons mentioned above, people were craving a change of scenery from sitting in their small spare bedroom or staring at their kitchen cabinets from 9-5 every day, so they rented homes elsewhere and worked remotely while also enjoying a vacation.
Those that saw the opportunity to purchase a second home for personal use but also utilize it as an investment, certainly took advantage of the changing times over the last year and a half. That’s not to say all second homes were used as short-term rentals or that they would even turn a profit. If the goal was to buy a vacation home AND rent it out when not in use, buyers needed to be selective in the location and price to maximize their return on investment.
Interested in buying a short-term rental? Be sure to follow these 5 guidelines:
- Identify the best location(s) for your property
- Analyze the short-term rental data within each market
- Compare zip codes and rental home sizes within your location
- Estimate your rental income
- Price your short-term rental appropriately
Check out AirDNA’s 5-Step Guide to Airbnb Real Estate Investing for more info on purchasing your first short-term rental property.
Thinking of buying an investment property or a second home? Click here to sign up for our webinar hosted by our very own Adele Lang and Josh Hayden of Blueleaf Lending
When I go on vacation, I’m interested in exploring the city or town I’m in as a local would. Sure, I’ll also check out some of the more touristy activities, but I enjoy spending my time in a new and unfamiliar place the way I spend my time at home in Chicago: dining at the restaurants, checking out a local fair, stopping at each brewery, visiting local wineries, picking out gifts at small shops off the beaten path, meander around the city and through parks for hours…you get the idea. The more countries and cities I visit, the more I long to have a home away from home (or multiple homes away from home) – one I can visit when the mood strikes but also share with others who also want to explore a new place.
Having now been in real estate for two years, my own real estate goals have shifted – I no longer desire to have a huge house in the city (it was never going to be in the suburbs), and I’ve researched different investment options and opportunities to make my dream a reality. I went from considering a single investment property to buying a multi-unit to finding a second home in Wisconsin or Michigan that can double as a short-term rental back to a multi-unit in Chicago, and then, back again to a second home…possibly in a location farther away.
Which is the best move? Well, if I knew, I would have made it already, but I’m carefully crafting my plan to ensure I reach my dream of eventually owning vacation rentals while living abroad (right now, it’s Spain, but that could change). That’s the key – to align your goals with each move so you can live out your own dreams, whatever they may be.