GMAC Real Estate Second Homes and other Flavors of Rental Property
GMAC Real Estate

Articles & Resources

Specialty Real Estate

Real Estate Calculators

Room Planner

Second Homes and other Flavors of Rental Property

Takeaways

  • Single-family residences are one of the best investment real estate options.
  • Apartment complexes are big, and so are problems when they occur.
  • Professional management companies are out there to help you manage investment second homes.

Did you know?

  • Close to two thirds of investment second homes are rented out six months of the year or more.
Find that money-making investment second home. Real estate purchased for rental comes in a number of types such as single-family second homes, condominiums, townhouses and apartment buildings. Each has advantages and disadvantages. Single-family second homes typically have better appreciation in market value over townhouses and condos, but the latter are much more trouble free for the "hands off" investor.

Apartments have a few distinct disadvantages over the other types of property. Apartments, like condos and townhouses, usually don't appreciate in value as quickly as single-family second homes, and the market value is determined by a "cap rate" based on the net operating income of the property. Single-family second homes on the other hand are valued based on comparable homes in the surrounding area. The second drawback is one of scale -- when there's a problem with an apartment property, that problem is usually big. Think replacing the roof, or facing an electrical issue affecting most, or all, of the units.

Appreciation and Profit

Because single-family second homes typically appreciate in market value faster than other types of rental real estate, houses are often the focus of investors. Renting single-family second homes is not trouble free because there's dealing with tenants and keeping up with maintaining the property. Tenants can be screened using credit reports and FICO scores to hopefully avoid the most troublesome prospects. For maintenance it's important to have access to quick cash. A home equity credit line provides an excellent source for these funds.

For the landlord who can't manage a single-family second home rental because of distance or other reasons, or simply doesn't want the trouble of dealing with tenants and supervising repairs, professional property management firms are available. These firms will charge 10 to 15% of gross rental income and may bill additional fees for various services.

Although single-family second home rental isn't trouble free, there is a great potential for profit. Most likely the property value will rise on the rental over time, and from day one a number of tax benefits kick in.

Search for Second Homes for Sale

To search for a selection of second homes for sale, please visit lifestylehomesearch.com, or visit the website of a GMAC Real Estate Office that serves the area where you'd like to buy a second home. To learn more about buying Second Homes or Vacation Homes, explore the rest of this section, or contact a GMAC Real Estate Agent.