Century 21 Island Life
Robert U. Valenzuela, P.A.
 

Getting The Most Out Of
Your Second Home Investment


Don't let emotion overrule logic when it comes to buying
By Tom Kelly

If the recent downfall of snow has you running to the slopes (or to a plane en route to warmer weather) don't get carried away with the first possibilities of a recreational investment. Yes, there very well could be more potential rental days for cozy chalets near ski hills this year, but do the research before you take the leap to become a landlord.

There are certain basics to consider if you are going to make the most of your second-home investment. It's easy to lose money on an emotional whim. Powder snow and picturesque mountains have ways of working wonders on the mind during a long weekend to "just check out the opportunity." Lots of people can lose money in real estate -- even in appreciating locales -- so try and do the most to protect your hard-earned cash.

Making a profit anywhere -- stocks, bonds, commodities, real estate, sales -- requires basic understanding and research. Regardless of what you see on television, there is no secret sauce that will absolutely guarantee big-time revenue and success. Your return, however, will be gauged differently if you decide it is only for personal use and not necessarily for investment income. How can you put a price on experiences and memories? For now, let's review some basics that are often overlooked in an emotional decision.

Picking your place. The three most-used words in real estate -- location, location, location -- are repeated for a reason. If the property will be solely a personal residence, will its style and layout hold its appreciation over the long term? Then think resale: If you had to sell in five years down the road, what would lure the next buyer? Finally, if you had to rent it out, is this the type of property that could definitely catch renter's eyes and possible rental dollars? What appeals to just you may not appeal to the rental pool you may depend upon for consistent income.

Picking your community. Even if the house is perfect, is the neighborhood one that you see yourself enjoying? Do you think most of the people you know would like it too? Remember, you can always add a bedroom or convert a patio space, but the area is set. Again, play the dual role of renter and resident. If the parcel will eventually serve you and your family exclusively, you need to choose a place where you will be comfortable later in life.

Finding the cash. If you've got some semblance of a down payment and can show the likelihood of rental income, you are in better shape than you think. One of the biggest changes in real estate over the past five years has been the easing of financing. Lenders have simply made funds more available.

Tax is a benefit, but... While mortgage interest is deductible on second homes, it's usually not wise to buy a home solely for tax reasons. If your property eventually becomes your primary residence, you can sell it after two years and pocket $500,000 of gain (married couple) or $250,000 (single person) tax-free. Sale of an investment property would not qualify for such a generous tax treatment.

Who's minding the store? Before you invest in this wonderful getaway, you must decide how you will handle management. Having tenants, short- or long-term, will require that the property be managed effectively. It's a business, unless you will be the only occupant. This means maintenance and improvement, as well as simple rent collection. You will either do it yourself, or you will hire others to do it for you. Management is a cost and will diminish your cash flow. Either you will spend your time to do it, or you will pay someone else. Choosing the more cost-effective approach will affect the return on your investment.

How much can you handle? Real estate that will ultimately prove a good investment because of price appreciation might be a challenge every month because of negative cash flow. You are responsible for paying for and maintaining your property regardless of whether or not the property is generating revenue. Before you invest, you need to create and hold a cash reserve to cover those weeks when the house is not rented, when the rent is late or when the toilet needs repair.

Tom Kelly's new book, "Cashing In on a Second Home in Mexico: How to Buy, Sell and Profit from Property South of the Border," was co-written with Mitch Creekmore, senior vice president of Houston-based Stewart International. The book is available in retail stores, on www.Amazon.com or get your signed copy at www.tomkelly.com.

Copyright Inman News. Used with permission.

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~ Henry & Lori Coombs

It was a pleasure to work with Robert. He's extremely knowledgeable about the market and real estate in general. He was very easy to work with and answered all of our questions throughout the process.

 

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Great job!! Very professional. Robert is great and excellent managing end to end transactions. Always here to help and assist. Once again, awesome job!!

 

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Robert is an honorable man, a pleasure to do business with. I could not be more pleased.

 

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We have already recommended him. He has history and knowledge of Key Largo that is priceless. Robert provided excellent hands on assistance with everything. Now I'm happy to call him my neighbor.

 

~ Mayte & Rolando Rodriguez

Great real estate agent.

 

~ Juan & Beatriz Colao

It was my first time buying a home. Robert was patient and made it easy. He treated me like family. I recommend him to people all the time!

 

~ Samantha Ellis

Robert was very friendly. We like working with him very much and would use him again. Thanks for all of your help!

 

~ Ray Sharp & Christy Luent

Outstanding service and professionalism received from Robert. He went out of his way to help us. Property sold within one week. He's the best!

 

~ Ileana & Gil Rodriguez

He was wonderful, courteous, and did all he could to sell my home. I have already recommended Robert to my friends and will continue to tell anyone else who is looking for a new home.

 

~ Kevin & Michele Pederson

The realtor is a true professional. Everything was great! He was excellent. I will refer him every chance I get. Very service-oriented.

 

~ Andy & Bertha Fernandez

Robert Valenzuela was very honest, professional, and very courteous with us. On behalf of the Salgado family, we want to thank Mr. Valenzuela for all his patience and kindness. In our opinion, Robert was outstanding with his performance and we will definitely recommend him to our friends and family.

 

~ Carmelo, Rosa, and Maria C Salgado

He's very good at what he does and knows his market.

 

~ Peter & Lourdes Pinto

He was wonderful! So helpful, words do not describe how much he helped us!

 

~ Amy & Stephen Scott

Excellent service! Robert was available anyday at anytime. He was always very friendly and helpful! He was excellent. I know that he will help my friends/relatives and they will be satisfied.

 

~ Daniel & Rosie Pou

He was very kind & helpful. He listened to us and found us the exact house we were looking for. I will recommend Robert to all my friends. It was a very pleasant experience dealing with Robert.

 

~ Didio & Monica Victores

For the last few years we have been buying, selling and building properties here in the Florida Keys. Robert has been part of our success since we started doing business with him. He is very dedicated, knowledgeable, professional, and most of all personable. We have and will continue to recommend Robert to all our friends, family and business partners.

 

~ Rene & Fradys Castillo

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