You’ve discovered this great resort community. You’ve had a wonderful time there and would love to go back anytime you want, without making reservations.  And…if you make some money along the way — all the better.

Congratulations. You may just be the person to buy a vacation rental.

But investment experts warn that you should never look at the idea just as an investment. Though the investment potential is there, a vacation home cannot substitute for a diversified investment plan.

However, if you love a particular beach house and cherish the time you spend there, then let’s look further.

Buying A Vacation Home for the Right Reasons

Investment experts will be the first people to tell you that you’ll never make the money on a vacation house that you could make on other investments. So if you buy one, make sure, above all, that this is a house and an area you enjoy. It will be worth the cost if you spend as much time there as possible, put your heart and soul into caring for it, or plan to keep the home in the family for future generations. There’s no price for that.

Know What You Can Afford

If you intend to obtain a mortgage, resources for mortgage calculators are available to assist you determine how much home you can afford.

The lending environment has changed substantially. Banks are very strict with their requirements. In most cases, you will need a 20 percent down payment.

Even if you view the vacation home as a potential way to earn income, don’t count on that to help you pay for the house. Keep in mind that you don’t have to buy the ultimate beach house with 5,000 square feet and a private dock. It’s OK to start small.

Prepare for Extra Costs

Beyond the initial purchase costs and closing costs,  there will be taxes, insurance, maintenance and utilities. You may need to consider the costs of property management and cleaning services.

In beach and mountain areas, sand, salt, wind and ice can raise a home’s maintenance costs substantially. A beach house may need to be painted every two or three years, and a mountain house may need annual deck repairs.

Annual costs of upkeep should be in your budget from the start.

Building Pitfalls

The idea of building a house to suit your dreams is very appealing. However, in resort areas, it can quickly turn into a nightmare.

To build a house from the ground up, you may have to deal with coastal authorities, local building restrictions, aggressive homeowner associations and less-than-professional contractors.

Coastal commissions and community restrictions can often dictate plant material allowed, fencing restrictions and more.

Granted, not all resort areas come with these caveats, but the process of building a house rarely comes in under budget. If you want to keep your costs under control, stick with a home that’s already there.

Work with a Local Real Estate Professional

Resort communities are charming, but they can carry problems that are hard to live with. In the mountains, you’re often facing hazardous driving conditions. At the beach, you may have parking problems. A real estate agent will help you envision what your purchase may look like long term.

All real estate is local. An agent can also be a great resource for little-known information on financials, covenants and community restrictions.

Location, Location

Your idea of the perfect vacation may mean a place with no television, no cell phone and no sight of civilization. That’s not always appealing to a potential vacation renter. If you intend to rent the property, it’s a good idea to make sure you meet the needs of the vacationer.

You need to be on the beach. Not near the beach. You need a house with lots of sleeping options to accommodate as large a group as possible.

Ideally, the home will be in the thick of things.  Think of your vacationer as someone who wants to find the house, park the car and never get in the car again for the entire week or weekend. They want to walk to the beach, walk to the store and walk to entertainment.

These types of properties generally cost more, but they make better rentals.

Research All Four Seasons Before You Buy

It’s a good idea to visit the area you’re considering in each season of the year. Though the location is perfect, how does the community function during winter, or during the off season.

Caution in Other Countries

In other countries, rules about title and ownership are not as clear as they are in the United States. For example, in Mexico, you can buy the house but only lease the land. The government owns the land and can take it back at any time.

In many countries, you run the risk of your property being ransacked or nationalized. Think of most of the world as a place where there is no 911.

At the very least, if you want to buy overseas, read the State Department’s report on the country. It’s an authoritative guide that will help you assess whether the risk is worth the money.

Joint Property Investments

These types of agreements can cause problems in even the closest of families. If you’re confident that your family can weather disagreements about buying, selling, renting, furnishing and scheduling the use of the property.

Assure that communication agreements outline all aspects of your property purchase down to the last detail of rights and privileges of ownership.