“Second Homes” are the focus of the latest Savills 2018 spotlight on global trends in ownership and renting, as the rise of digital technology worldwide has given birth to a new generation of investors who are seeking income producing investment properties located in some of the world’s top destinations. Over the last decade, the international market for second homes has evolved, with buyers now prioritizing return on investment from ongoing rental income over simply indulging in the luxury of owning a vacation home only for personal use.
“In a low interest rate environment, investors of all types are seeking out income generating assets”, wrote Savills. “The number of buyers intending to use their property solely for their own use has fallen from over 90% in 1971 to less than 40% today”.
Read on to see what a recent survey by Savills and HomeAway has to say about the future of income producing properties like vacation home rentals and learn how to spot the best real estate investment opportunities on the global market today.
Income Producing Investment Properties
Online short-term vacation home rental services like Airbnb and HomeAway have rapidly expanded in recent years, making it easier than ever for more investors to capitalize on this reliable, consistent stream of revenue from the global income-producing real estate market. As a result, there is also a growing demand for professional property management services, since the best investment properties probably won’t be located right in your home town.
It’s important to point out that, regardless of where your second home is located, easy air connectivity matters if consistent rental income is the goal. Similarly, it won’t matter how beautiful your vacation home is, or how pristine the location, if it’s difficult to reach. When considering a destination for real estate investment, keep in mind that the opening of new routes can have a strong positive impact on local property markets, and vice versa.
“The fortunes of some second home owners are intimately connected to the fortunes of flight operators”, wrote Savills. “Those on routes served by multiple airlines are probably less exposed”.
Here are a few other very important things to look for in a second home or vacation home rental:
- Strong Internet Connectivity
- Balcony or Terrace
- Parking or Easy Mass Transport
- Close to a Beach
- Amenities Nearby
- Cultural Attractions
- Entertainment Options
Best Markets for Real Estate Investment
Although the credit-fueled boom of the early 2000s saw a massive expansion in the market for second homes and vacation homes, the global financial crisis of 2007-08 changed the way buyers approach real estate investment. In recent years, all of the world’s major economies have expanded again and investors are looking for ways to create secure, ongoing retirement income and find protection from stock market volatility.
“They are seeking income in a low-yield environment, and finding that short-let residential property and holiday homes can provide it”, wrote Savills.
Globally, international tourist arrivals grew by 7% in 2017, reaching an unprecedented 1.3 billion, with hotspots like Mexico’s Riviera Maya experiencing record growth in tourism numbers, along with the Mediterranean region. Practically speaking, real estate will never depreciate in places like the Riviera Maya or any of the other top holiday destinations around the world, making this one of the safest alternative investments available today.
After you narrow down the search to a great location (or two!), be sure to interview a few of the best local real estate investment advisors until you find someone who deserves your trust. Buying an income producing investment property is one of the most important decisions you will ever make, so ask to see client testimonials and double-check any claims that seem too good to be true.
Do you have questions about owning a second home? Post them in the comments!
Read Yes, a Vacation Home Can Also Be an Income Producing Property to learn more about this exciting alternative investment opportunity!