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The Pros and Cons of Purchasing a Vacation Rental in the Florida Keys

Have you, like so many recently, been considering purchasing a property for sale in the Keys that you intend to use as a second home or to rent out as a vacation rental? There are many things to consider when deciding if this is the right move for you. Make sure to carefully consider the pros and cons of owning a vacation rental before you take the plunge.

Owning a vacation rental is a great way to earn extra income and grow wealth. Depending on the market, owners can typically recover their mortgage payment and then some. Rental income can often provide a great avenue of cash flow for owners. The many vacation rental sites, like AirBnB, HomeAway and VRBO provide many avenues to make sure that your property is consistently occupied. While it does take work sometimes to market your property on these platforms, the payoff is well worth it.

A traditional fear for most vacation rental owners is having it sit empty. The mortgage payment does not go away simply because  there are no tenants or vacationers. The good news is the Florida Keys real estate market for short term and vacation rentals is perennially hot with tourists and vacationers who want to partake in our fishing, diving, and more for weeks at a time. People want to visit the Florida Keys in all seasons, so this really helps to protect your investment.

As investment properties appreciate and principal is paid off over time, a vacation home can become a great store of wealth in the future as well. Many vacation property owners use their investment as a nest egg for retirement, all the while enjoying the property as their own vacation house whenever they have use for it!

Owning a vacation property in the Keys, however, can come with a hefty price tag. On top of mortgage payments, owners are responsible for a multitude of costs. Included among them are annual licensing fees, insurance premiums, hosting fees, cleaning fees, utilities, supplies, all necessary repairs, and more. While these are all out of pocket costs for owners, the good news is that most of this can be expensed and written off for tax purposes.

Owners of vacation homes are also on the hook for getting the property ready for new occupants and for maintaining the property. This can include cleaning, restocking supplies, and other management duties. You are able, of course, to hire a property management company to take care of managing your property. This releases you of personally managing many responsibilities, but typically can cost you up to 15-40% of your rental income.

Be sure to fully research the city and neighborhood that you are considering purchasing in. Most cities in the Florida Keys require that you register for a license to be able to legally use your property as a vacation rental. Additionally, many neighborhoods simply do not allow any short term rentals at all. You do not want to get into a legal situation that could have negative consequences, so be sure to check with the city and the HOA before you purchase if you intend on using your purchase as a vacation rental.

Once you have made up your mind to purchase an investment property in the Florida Keys, decide how much you are willing to spend. Also, don’t forget that investment loans typically have higher rates than regular mortgage loans. This will make your monthly payments higher. Most mortgage companies also require larger down payments on investment properties, typically around 25%. Don’t forget to factor this in when looking at your price cap.

Overall, if you are able, purchasing a vacation rental property in the Keys is a great investment. Now is a great time, before interest rates go any higher and make it more expensive, to get into the market. Before you know it, your investment could pay high dividends!


Broker's Edge Realty
92300 Overseas Hwy Suite 303
Key Largo, Florida 33070

1(800) 692-3605
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