Monday, October 5, 2009

Why you should seriously consider renting your second home out?

This lakefront cottage located in Muskoka, Ont...Image via Wikipedia

Renting your second home is quite a big decision for most families. After all, you've put a lot of love and energy (not to mention hard earned money) into buying the place and maintaining it and it's not very common yet in India to rent it out to unknown people. In a later post, I will cover how to prepare your home for use as a vacation rental but in this post, I'll try and outline some of the key reasons why you should seriously consider doing so:-

1. No matter what, it is very unlikely that you will use your second home for more than a few weeks a year until you retire. As such, it will become important for you to maintain it for an extended period of time and keep adding amenities to it so that when you are ready to retire there, it is comfortable and well maintained. If you own an isolated property i.e. one that is not in a gated community or where you have friendly neighbors who can be entrusted to keep an eye out, it may also be necessary for you to keep a full time servant there who is resident at the property and has the necessary connectivity i.e. a landline phone etc. so that you can keep an eye on him. These expenses add up esp. over long spans of time and the income from vacation renting will more than cover the same.

2. Some of us are fortunate to have inherited beautiful properties. Others are not so. If you don't already own a second home, then it is imperative that you buy one in a gated community which comes with the benefit of security. This however will be expensive easily setting you back by 40-50L Rupees. If you had to take a mortgage for 20 years, this would mean a monthly payment of close to 40,000Rs. Given that you want to retire to your second home at the earliest, I would advise buying carefully in areas there there exists significant income generation potential and influencing the design of the home to ensure it is well suited for vacation rental. Based on my own analysis, there exist quite a few places in India where the property rates are low while showing good returns on vacation rentals. In fact, in some places like Goa, our analysis shows that just renting out on the long weekends would ensure you are able to make your mortgage commitments meaning the property is pretty much free in the long term.

3. Improve visibilty and push up your own property prices. You've done your digging and chances are you have found a truly destination where the property prices are reasonable and where the natural beauty is breath taking. However, you have a vested interest in over time, a vibrant community of 'People Like You' being created in your vicinity so that you have nice people to socialize with and for the surrounding infrastructure to improve as the number of people with spending power increase in that area (read restaurants, provision stores). It is a proven statistic that people who stay in homestays are very motivated to buy a second home post the experience. In fact, we encourage people looking to buy second homes to go and rent a vacation rental in the same area for at least a week first to experience first hand living in the area. If you are looking to sell part of the land on which your homestay is built or an adjoining plot - then there is no better way to get a wide choice of prospective buyers and screen them aside from doing this.

4. Pay for luxuries. We all want that gazebo or that jacuzzi but let's face it - it's expensive. A gazebo could cost you about 2Lakh Rs. and a Jacuzzi roughly the same. These are however very affordable when you have generated some income and can factor in the additional income that you could generate with these amenities in the property. The travelers will be there only for a few weeks, leaving you to enjoy these improvements forever.
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1 comment:

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