MONEY & ENTERTAINMENT

If you want to spend your winters and summers away from home, then you might want to consider investing in a serious vacation property. This means something more intensive than a trip to Cancun at an all-inclusive resort, or a timeshare that gives you a guaranteed 2-week holiday every year. A vacation property tends to be longer lasting, involves some research, and offers you a practical investment that will reap returns year after year, with the added bonus of having a tangible asset to sell or pass on to your heirs. If this sounds like the sort of thing you might be interested in, then keep reading and learn the ins and outs of investing in a vacation property.

Getting Started
The old adage that the best investment you can ever make is land is actually not that far off. Although land or property may not have the same liquidity as stocks and bonds, it does offer a certain concreteness that money alone cannot. Land is limited, and depending on the location – often highly coveted. Furthermore, land usually retains its value, and more often than not it increases in value – substantially. So it is great for long term investing, and a vacation property has the added value of giving you an immediate, annual return – a holiday. And if you buy a property that you can rent out when you aren’t there, you receive the added bonus of having your property earn you income or pay down your mortgage.

What To Look For
As always, the most important thing to consider when purchasing your vacation property is the location. However, there are several other key factors that are linked to location that we will discuss shortly. You are either buying a property solely as an investment, or you are buying the property as an investment that you can use. Assuming it is the latter, you need to disregard every possible location save the one(s) that appeal to whatever it is that is most important you. Here are some considerations to make based solely on the location:

• What does the property have to offer for you?
• Are you looking for beaches and sunshine?
• Are you into skiing?
• Do you like hunting?
• City versus country
• Developed country versus modern country
• Population of the area
• Accessibility: How are you getting to this location? Boat, train, plane or car?
• How far are you willing to travel when you want to use it?
• How often will you be using the property?
• Who will be using the property – family, friends, or renters?

Other Considerations
In addition to the above-mentioned points, there are some other very important factors that need to be considered before you choose your location. First, you should always investigate the politics of the country that you are going to buy your property in. If you check out websites such as the CIA world fact book or Rough Guide, you will get a good assessment of the political and economic climate of the country you are interested in. There have been stories – even from countries that are as stable as Mexico – of owners being run off their land by rebels, which would make your investment worth very little.

Second, you should always try and look for bargains. As a country comes out of a financial crisis, they often open their economy and allow for foreign investment. This need for foreign dollars can also come about when a country has its currency devalued, and the need for foreign currency drives the government to actively seek foreign investment. Land is often the sacred cow of any government, but it gets sacrificed to foreigners when the need for investment is high.

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Third, don’t always gravitate to the areas where there is already serious economic activity and foreign investment. There are often thousands of miles of beachfront available, but the government might only be promoting a specific area. You might be able to purchase a large piece of land for next to nothing, as long as you are willing to look at areas that are remote. Plus, look for the opposite thing that a country or are is promoting. If they are promoting beachfront lots, see what they have inland or in the mountains – you might be able to buy into something that has an amazing view for a fraction of the price they wanted down by the water.

Pitfalls
With every investment comes risk, and buying a vacation property is no exception. There several important things you need to consider before you go shopping, otherwise you could stand to lose all or part of your investment.

1. Know the law. Many countries have stringent rules on foreigners owning land, so you need to have a lawyer you trust look over anything before you buy. This is particularly true of former and current socialist countries.

2. Cash or mortgage? Similar to the above, you might find financing particularly difficult in the country you are trying to buy into. Plus, your home country might be reluctant to loan you money for a property that is located in another country – particularly one that does not allow you to formally own 100% of the land. Get the facts on the country you are interested in prior to making an offer on an investment property. That way you can have the money or financing in place before you go shopping.

3. Plan your exit strategy. Make sure there are no hidden rules requiring you to become a resident of the country or one that requires you to live on the property. The last thing you want to have happen is to have your property forfeited to the government because you failed to note a clause on foreigners selling land in that specific country.

4. Building supplies and labor. Can you get the dream home built on the site you just purchased? If you buy on an island, you might have to ship all your building supplies in, creating a massive overhead that you did not expect. Check into the local labor laws and make sure you can start construction on a timeline you can live with.

Final Points
Owning vacation property is something that should be seen as a long-term investment, not a short-term cash grab. Keep in mind that this is something you will use for decades, with the idea that future generations of your family will use for centuries. If you think of the investment in this way, you will take the time to make a purchase that will satisfy your needs. And if it doesn’t sound like a good investment right now, think about all those expensive holidays at sub-standard resorts you will be eliminating, and add up what they will cost you over your lifetime.

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