Are you dreaming of owning a vacation property or a resort community? Whether it’s a ski chalet, an RV campground, a golf villa or a beachfront condo, buying a resort property can be a rewarding investment. But it also comes with some challenges and trade-offs that you should consider before you make a purchase. Here are some of the pros and cons of buying a resort, whether close to home or a far away destination.
The Benefits of Resort Ownership
Vacation properties can offer many benefits, such as:
- High demand: According to Zacks, there has been a recent upsurge in RV sales, which may drive demand for campgrounds and RV parks. Similarly, resorts are rebounding from COVID effects and are attracting many relieved travelers who are looking for more relaxed and scenic vacations.
- Variety of options: There are many types of resort and campground properties available on the market, ranging from luxury communities with spas and restaurants to master-planned communities with office complexes and hotels. You can choose a property that suits your budget, style and target market. You can also meet like-minded people who share your interests and values.
- Rental income: Many resort and campground properties can double as income-generating rentals, which can help offset the cost of ownership. You can rent out your property to short-term or long-term guests, depending on the rules and regulations of the community. You may decide to retire in your vacation property or use it as a family getaway. You can save money on hotel fees and enjoy the comfort and convenience of your own place.
- Appreciation: Resort and campground properties can also appreciate in value over time, especially if they are located in desirable areas or have unique features. You can sell your property for a profit in the future or use it as collateral for other investments.
- Diversification: Buying a resort property can help you diversify your assets and reduce your risk exposure. You may also find properties that are undervalued or in high demand, especially in areas that are recovering from the recession or experiencing growth.
Challenges in Resort Ownership
However, purchasing a vacation destination as an investment property, especially one in a far away area, also comes with its fair share of challenges, such as:
- It’s expensive and requires more responsibility: Buying a resort property is not cheap. You will have to pay for the mortgage, property taxes, insurance, utilities and other fees. You will also have to deal with the legal and financial aspects of renting out your property, such as screening tenants, collecting rent, paying taxes and complying with local regulations. You may need to hire a property manager or a rental agency to help you with these tasks.
- Restrictions and fees: Resort and campground properties are often part of gated or planned communities, which means they may have restrictions on how you can use, modify or rent out your property. You may have to follow certain guidelines on landscaping, exterior design, noise levels, parking, pets and more. They may also require you to pay monthly or annual fees for maintenance, security and amenities.
- Competition and seasonality: Resort and campground properties may face competition from other similar properties in the area, which can affect your occupancy and rental rates. They may also experience seasonality, which means your income may fluctuate depending on the time of the year. You may also face risks from natural disasters such as hurricanes, floods, fires or earthquakes that could damage your property or reduce its appeal.
- Management and maintenance: Resort and campground properties require regular management and maintenance, which can be time-consuming and costly. You may need to hire a property manager or a caretaker to handle the day-to-day operations of your property. You may also need to deal with repairs, renovations, insurance and taxes.
Research and Assistance
Before you purchase a resort or campground as an investment property, make sure you do your research and due diligence. You should:
- Calculate your ROI: Estimate your annual rental income, expenses and appreciation for your potential property. Compare them to your initial purchase price and ongoing costs. Look for properties that have a positive cash flow and a high return on investment (ROI).
- Check the market conditions: Research the supply and demand for resort and campground properties in your desired location. Look for properties that have a competitive edge or a niche market. Avoid properties that are overpriced or oversaturated.
- Inspect the property: Visit the property in person and inspect its condition, features and amenities with the help of a professional. Look for any signs of damage, wear and tear or safety issues. Hire a professional inspector to evaluate the structural, electrical and plumbing systems of the property.
- Review the rules and regulations: Read the bylaws, covenants and restrictions of the community where the property is located. Find out what you can and cannot do with your property. Make sure you are comfortable with the fees, rules and regulations of the community.
- Find a partnering broker: A professional commercial real estate broker can help guide you through tough decisions and keep you informed of the market conditions, regulations, and ROI.
Purchasing a resort, hotel, RV park or campground as an investment property can be a rewarding venture if you plan carefully and wisely. It can provide you with passive income, capital appreciation and personal enjoyment. However, it can also entail risks, responsibilities and expenses that you need to be prepared for. You should consider your lifestyle, financial goals, location preferences and rental options before you make a decision. You should also work with an agent who specializes in buying vacation properties and who can help you find the best deal for your needs. It always pays off to rely on the expertise of a professional. If Caspian Group can help you in your investment journey, please reach out!