Is vacation real estate a good investment?
A: Real estate rarely loses in the long term, especially in vacation
markets. Understanding the Big Bear Lake vacation rental market is
important in supporting this point. Big Bear Lake California draws
vacationers from five densely populated areas, Los Angeles, Orange
County, San Diego, Palm Springs and Los Vegas. Proximity to these
highly populated areas creates a steady flow of vacationers. You don’t
have to be a millionaire to invest in a vacation rental home. Based
on your current financial situation you can invest in 3, 4 or 5 star
vacation rentals. There is demand for all three types of rental properties.
Is now a good time to buy a Big Bear Lake vacation rental investment?
A: Any investment is a personal decision for the investor and it is
job to do sufficient research to make sure this is the right move
for them. An important factor would be, are people renting vacation
properties in the current market? Yes they are. There has been a socio
economic shift in who is vacationing and where they are going to vacation
which is important to understand. Families who might have gone to
Aspen, Tahoe or mammoth in 05 are coming to Big Bear for their annual
winter vacation because it’s closer and more cost effective.
Families are still vacationing, they are simply downsizing their vacation.
It is important to work with a vacation rental company that can educate
and inform in detail the nuances of vacation rental marketing and
the current economic conditions in a way that instills confidence
in the investor. Always ask to see numbers.
Can I buy a vacation rental that will cash flow?
A: This is a tough question to answer because everyone’s financial
situation is a bit different. In addition different vacation home
buyers have different levels of interest for personal use and vacation
rental location as well as other criteria, and different vacation
rental companies have varying levels of dedication to marketing and
managing the rental. It is important to do your homework, understand
the criteria for a good revenue generator and research all the vacation
rental companies in Big Bear to makes sure you are setting yourself
up for the success you anticipate. Knowledge is power.
How much can I expect to make in rental revenue from my vacation rental
investment each year?
A: It is hard to make a sweeping statement that will apply to all
homes and homeowners. That being said, vacation rental homes tend
to bring in around 5-15% of the homes value in rental revenue annually.
For example, a property valued at $250,000.00 can bring in anywhere
from $12,000.00 to $37,000.00 in annual rental revenue. Where your
investment property falls depends on several factors such as location,
size, amenities and personal use. It is important to work with an
agent and vacation rental company that will inform and educate you
on the criteria and practices that will maximize your revenue generating
How can you predict if a market will appreciate over time?
A: Property value growth is an important consideration when buying
a vacation rental because most vacation home owners are in it for
the long term. You’ll earn revenue but it would but it would
also be nice to know how your investment will appreciate. Your real
estate agent should be able to inform you of current market conditions
and how property values have increased or decreased in recent years.
How does your agent do this? With real estate comparables in the market
you are interested in buying in. Your agent will also help you review
property tax records and parcel data. This will enable you to examine
how the taxes have increased or decreased over the years and also
the changes of the value of the home or homes in the area.
Is it better to buy a vacation home in a popular area of Big Bear
Lake or a more remote area of Big Bear?
A: Where you buy a vacation rental investment will likely depend on
your budget and your personal preference. A cabin in a more remote
area may cost less but may be more difficult to rent. Revenue comps
are important when trying to grasp the investment properties potential.
An agent with a comprehensive understanding of the different areas
and their revenue generating potential is critical to your investment
success. Your real estate agent should be able to give you compelling
fact based information on an areas potential. The only way an agent
will be able to do that is if they are working in close relationship
with a vacation rental company that has a large inventory and allows
that agent to have access to the hard numbers their vacation rental
properties generate. Make sure to ask your agent if they can answer
these important questions to your satisfaction. And don’t settle
for answers, get actual revenue comparables for the area and property
type you are interested in. Remember, this is an investment, you need
to SEE the performance of a revenue generating investment property
or one just like it not just hear about what it “might”
be able to do.
What is the best area in Big Bear to buy a vacation rental investment
A: The best area is the area you and your family enjoy the most and
can afford. One of the most valuable assets of a vacation rental revenue
generating investment is the ability for it’s personal use by
it’s owner and their friends and family. If your family prefers
winter sports you will want to take a good look at the cabins close
to Big Bears magnificent resorts. If your family likes to get out
of the heat in the summer and escape to the cool mountains, you will
want to look closer to the lake. Don’t forget to work your personal
interests into your investment purchase. You and your family should
look forward to returning to your vacation cabin every year. Also
keep in mind, if you love your cabin it is highly likely that other
families will love it too and want to rent it out for their vacation.
What amenities should I look for in a potential vacation rental?
A: The must have amenities vary a bit from location to location but
there are some basics you need to know about. Some basics are a spa,
game room, boat dock, pool, garage and a pet friendly cabin. Other
amenities and criteria will fit into making your cabin competitive
for attracting renters and your real estate agent should be able to
tell you exactly what those are for the property that interests you.
What is the ideal number of bedrooms and bathrooms?
A: The ideal number of bedrooms and bathrooms vary. The more rooms
the better because large groups like to rent out cabins and share
the costs but you might not be able to afford a 6 bedroom 5 ½
bathroom cabin. A good rule of thumb is equal bedroom to bathroom
ratio or no less than one deviation. When vacationing, people generally
want their own bathroom. If you find the perfect cabin for you and
your family and it needs an additional bathroom, work it into you
budget and add one on. There is an abundance of 3 bedroom 2 bathroom
cabins in the Big Bear Lake area, a way to distinguish your cabins
ability to rent would be to add an additional bathroom and create
a three bedroom three bathroom vacation rental.
How important is a view?
A: For many vacation home buyers a view is a key amenity in itself.
A view will always attract more renters but you will likely spend
more money on a cabin with a view. 70% plus reservations are taken
on line and how your cabin represents on line will make a difference.
Cabins with a view will draw higher rents just as lake-front cabins
will. As with all amenities, you will work all the criteria of your
potential purchase into the formula of your revenue generating resort
market investment property. Certain amenities such as a view will
naturally attract a more upscale vacation renter. Your real estate
professional should be able to assist you all the way through this
How do I determine a cabin’s rentability as a vacation rental?
A: First, find out if the home has ever been on a vacation rental
program. In a vacation rental market that information should be accessible
to the agent you are working with and it is a reasonable expectation
for them to provide rental history if there is one. If there isn’t
a rental history there are similar cabins in the area of your interest
that are on a vacation rental program and your agent should be able
to get their rental histories for you to review. Do not settle for
“opinion” about a cabins revenue generating potential,
look at actual revenue comps.
Is it a good idea to buy a fixer-upper as a vacation rental?
A: Whether or not to buy a fixer-upper is your call. While you may
be able to buy a fixer-upper at a rock bottom price right now, it
might require a bit of time and money before it can begin to generate
revenue. If you are resourceful and experienced in fixer-uppers you
might find some great opportunities, however, the further away the
property needing fixing is from your permanent residence the more
challenging the task of getting it fixed and functional to generate
revenue. Be practical when considering a fixer-upper.
What should you research before buying a vacation rental property
in Big Bear?
A: If you intend to rent out your vacation property, one of the first
things to check would be restrictions and requirements on short-term
rentals. Your real estate professional should be able to help and
you can also contact the planning department of the local government
office for zoning restrictions. For example, cabins of government
land may not be rented out on a vacation rental program. Your agent
should be able to inform you of all these important details. Another
consideration is the cost to insure the home. Make sure you have an
understanding of the insurance requirements of a vacation rental property
as well as the level of insurance of the vacation rental company you
choose to be associated with.
Is it better to buy a condo or a single family home?
A: There are pros and cons to each property type. A condo will obviously
provide for easier maintenance from afar and also shared maintenance
costs with other owners in the complex. You will also be able to advertise
the extra amenities in the complex. For example, you might not be
able to afford a cabin with a pool or boat dock but if you buy a condo
your guests will have access to the pool and boat dock in the complex.
Vacation condos are also usually built in the best locations because
the developers have enough money to invest in the land. At the same
time there can be limits within the homeowners association when it
comes to rentals. You and your renters will also lack privacy because
you are sharing walls with your neighbors.
A single family home will provide for much more privacy. In general
it can be less per square foot, however, you have to maintain the
exterior and grounds yourself. Make sure to get a detailed report
on the revenue potential of a condo vs a single family cabin. Your
Big Bear real estate agent should be able to help you with this in
Q: Can you use an IRA when buying a vacation home?
A: Yes, you can use your Individual retirement Account (IRA) to purchase
a vacation rental home. It’s called a self-directed IRA. Realize
though, if you use a self-directed IRA there are some very strict
federal guidelines. Notably, you are never allowed to stay in that
home. It’s to be used strictly as an investment. You’ll
also need a custodian to manage the account. To find a custodian or
learn more about using self-directed IRA’s to purchase vacation
homes Google “self-directed IRA.” This can be an especially
appealing option to investors with more than one vacation rental investment
whereby the investor has a vacation rental they can use but also an
investment that they do not use.
When buying a home, how do you determine whether it should be classified
as a “second home” or “investment property?”
A: Mainly for mortgage purposes, you need to determine whether you
will be using your vacation home as a second home or as an investment
property. This makes a big difference in the kind of mortgage you
should buy. You must realize that this is only a question for mortgage
purchases, how you claim your property on your income taxes is a completely
With a “second home loan” you must be able to qualify
under the second home’s terms. Generally it means you have to
be able to afford it just as you would your first home. Under this
loan there is no consideration for potential rental income.
An “investment property loan” is a mortgage where everyone
concerned knows you are buying the property strictly as an investment.
Accordingly certain factors com into play. The bank will want to know
the rental history of the property, which will be taken into consideration
for your affordability factor. Also, these types of loans are considered
by the lender to be higher risk. So the risk for the bank translates
into higher interest rates and higher fees for you.
I already own a cabin rental and am thinking of buying another. Should
I buy a second vacation cabin in the same market as the first or should
I buy somewhere new?
A: If you already own a second home and you are interested in another,
you might want to consider buying in the same market as your current
vacation home since you are already familiar with the area. However
this does not allow for diversification or variety in your families
vacations. Some owners choose to have a beach house, ski cabin and/or
desert home so they can stagger their busy seasons, enjoy different
kinds of vacations and also manage risk in case of a natural disaster.
But this also means more research to really learn each area. A very
good resort market real estate agent will be able to assist and refer
you to another high performance resort market real estate agent in
another resort market. Another option is the resort market upgrade.
Once equity is built in your current mountain resort vacation rental
property perhaps it is time to start looking at the lake front you
have always wanted or get into the six bedroom luxury cabin that is
in the high end rental income bracket. Your comprehensive Big Bear
Lake resort market real estate professional will be able to help you
truly achieve your dream vacation home investment ownership.