If you haven’t looked at the prices people are getting for rental properties in Sarasota, you should. The rents compared to the cost of ownership are very favorable for the owners of single family homes and condos. Further, as stock market volatility is making it look like downside risk is outweighing upside opportunity in stocks, investing in a local property can be highly appealing.
I should note that the opportunity isn’t confined to Sarasota. Investors are hitting our state hard to buy up properties to rent for all seasons. If you are considering investing in a vacation rental or annual rental, it is helpful to know the pros and cons of owning these properties. This will help you avoid problems that can be encountered during your ownership period.
Advantages of Owning Vacation Rentals
Obviously, one of the best advantages of owning a vacation home is the rent money that you receive. Tourists and other visitors that need housing will likely pursue your property months in advance to take advantage of occupancies available, so you will often know your projected earnings well in advance. You have the option of marketing and advertising to tenants yourself or using an expert property management company to constantly book your vacation home.
Tax advantages are plentiful when you own vacation homes. The depreciation of the property can be deducted each year as an offset to rental income that you receive. This is like the mortgage deduction on a loan, but it is available for as long as you own a vacation home. Upgrades to the interior and exterior can be deducted as you make improvements to the property. This helps to keep the property fresh and new while taking advantages of tax breaks.
Risks of Owning Vacation Rentals
The risks of damage to vacation rental properties are traditionally higher compared with a standard rental property. The constant influx of new tenants brings the risk of increased damage. Investors that own vacation homes generally find out after the fact that a previous tenant has damaged portions of the interior or exterior. For this reason, insurance premiums are often higher for vacation homes. Unexpected loss, theft and destruction from severe weather are additional factors that raise insurance premiums for vacation homes.
Competition in the vacation rental market is usually fierce. Price wars are one of the things that can happen when there are many rental properties within a certain radius. However, we are not currently seeing it here.
In Summary
Many people find success in our rental market due to tourism, sunny weather and since Florida is an official retirement destination. Vacation homes rarely lose value over the long haul and provide a constant source of income when rented daily, monthly or seasonally. Of course, this is just a high-level overview. We can help you with the details necessary to determine if getting into vacation home investing is right for you.