The Ideal Florida Vacation Home Investment
Certain areas in the Sunshine State are ideal for investment now in the current real estate market. Those areas are located mostly on the shorelines of Florida: the south east coast, the Florida Keys and the west coast from Tampa Bay and points south. There are three good reasons why investing in a vacation home now makes good economic sense:
- 1. All Florida home prices are depressed.
- 2. Short term rental prices for the most part, have not declined.
- 3. A Florida vacation home can generate rentals all year round.
One must keep in mind that not all Florida vacation properties are good economic bets. First, the Disney area is not particularly a good investment. It’s a bit over built. Second, areas north of Tampa Bay on the west coast and north of Daytona Beach on the east coast have winters that are a little too cool to attract vacationers the year round. Therefore, the best places for investment in vacation rental homes will usually be further to the south. Also, the vacation real estate investor should only purchase in communities permitting short term (weekly) rentals. Many of the advantages enumerated below will not materialize, if short-term rentals are prohibited.
The Mortgage Meltdown and Recession Has Created Gold for the Savvy Investor
While home purchase prices have declined everywhere in Florida, the allure of the weather, beaches and waters continue to attract vacationers. During the summer almost everywhere in coastal Florida is a good vacation choice. During the winter, the ‘snow bird’ crowd flies in for several weeks or months of temperate weather in the more southerly areas of the Sunshine State. During the rest of the year, short term rentals are fewer, but still exist.
In line with the above, a weak economy means that many, who might normally opt for a vacation in Europe, have decided to spend their vacations in Florida. Also nowadays, people employed in corporate America are less apt to take long vacations fearing that they might not have a job after returning from a two week junket. Further, because of excellent airline service throughout Florida, now almost anyone can easily squeeze in a few days of sun from almost anywhere in the continental U.S.
This translates to opportunity for those looking to purchase vacation properties in Florida for investment. There are some excellent advantages to owning vacation real estate, as well:
- • A Florida vacation property doubles as an investment as well as a vacation escape
- • With a fall in prices and rentals remaining at or near their previous levels, a property on a weekly rental basis can quickly show a net positive cash flow
- • With basic depreciation and other out of pocket expenditures as deductible expenses, it is likely that an investor can show a “taxable” loss, thereby reducing federal income tax liabilities.
Recovery in the Near Future?
It is unknown when prices will recover from the recent real estate disaster that has befallen property owners. Regardless of the future, a typical vacation home with its rentals can carry itself handily on into the future. This of course, assumes that the investor purchased the property at a reasonable level.
Assuming that a property can generate short tern rentals and also assuming that mortgage payments are not excessive, a property as stated previously will be a net positive investment. As home prices start to regain their footing, vacation properties in Florida, obviously will also enjoy the same price increases. If an investor decides to sell his vacation property at a later date, history has proven that the net rate of return on his investment, including rentals should be equal to or greater than other investment alternatives that could have been undertaken and available at the same time. When taken in toto, vacation properties in Florida in the right areas at the right price is an investment worthy of serious consideration.
