Best Vacation Rental Investment – Condo or House?

You’ve made the decision to buy a second home to use as a vacation rental. Congratulations!

The next question you have to ask yourself is important and can shape the rest of your real estate search – do you want to buy a condo or a single-family house?

Whether you’re strictly purchasing the property to be used as a vacation rental or for a combination of personal and rental use, both condos and single-family homes have their upsides and can be great returns on investment.

David Siddons, a realtor with EWM Realty International who specializes in luxury properties, says you need to be honest with yourself about how involved in the management of your property you want to be – that will help you decide whether a house or condo is right for you.

“How involved are you willing to be in your property? How labor intensive?” Siddons says.

Generally, owning a house means you’re responsible for the external maintenance and upkeep of the property. At condos, however, that’s usually handled by the condo’s homeowners association.

Michael Brown, realtor and founder of SecondHomeSearch.com, shares the same sentiment.

“Are you comfortable coordinating maintenance yourself, or is that something you want someone else to do?” Brown adds.

Single-family homes usually generate a greater return on investment than a condo. So, if you’re interested in maximizing your revenue and willing to roll up your sleeves on the weekends and weed the garden, you might want to purchase a home.

“Labor intensity and profit return go hand-in-hand. You can’t have your massive ROI without having to get your hands a little dirty,” Siddons says.

If you love everything about owning a home to use as a vacation rental except for the maintenance part, you can always hire a property manager, like TurnKey, to oversee things like maintenance.

“Property managers are great. They take a margin of the profits, but it actually works out well,” Siddons says.

TurnKey charges an industry-low commission rate – about half of what most property managers charge. We’ll handle your maintenance, reservations, and more. Learn more about partnering with us here.

Another thing to consider in terms of profit on your purchase is appreciation, especially if you’re planning on selling the condo or home down the road.

Historically speaking, homes appreciate faster than condos – however, there are a few cities, like Seattle, Atlanta, and San Francisco, that are seeing higher rates of condo appreciation.

If a property’s appreciation is an important factor in your decision-making process, take the time to look at trends in the area you’re looking to buy in.

Whenever you do find a property that you’re ready to buy, make sure you identify all of the costs associated with the condo or house before you make the purchase – like what HOA fees will look like.

Virginia Coate, RE/MAX Paradise in Orange Beach, Alabama, points out that some condo HOAs will cover additional payments that can end up saving you money after paying the HOA fees.

For instance – some condo HOAs will go above and beyond the normal services, like exterior maintenance, sewer, and insurance, and also foot the bill for things like trash pickup, cable, and water. But, don’t make any assumptions about what an HOA may or may not cover.

“Make sure you have a real estate agent advocating for you. You want to get the right questions answered, especially with a homeowners association,” Coate says.

While single-family homes can exist in neighborhoods that have HOAs, you can still find homes in neighborhoods that do not have HOAs. Every condominium complex, however, has an HOA.

One of the most important questions you should ask an HOA before you buy a home to use as a vacation rental is what its policies regarding short-term rentals are.

“There are rules and restrictions,” Siddons says.

These rules can be about a variety of things, like length of stay, what property management company you must use, or whether short-term rentals are even allowed at all.

There is no “one size fits all” answer for whether a buyer should purchase a condo or single-family home – it all comes down to how involved the owner wants to be in the property’s management and their financial goals. Make sure you take the time to talk through things with your real estate agent, and they’ll help you find the property that fulfills all of your needs.

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