Ask anyone who has spent a day frolicking in the waves, hiking in the dunes or relaxing with a good book on the shores of Lake Michigan’s southern beaches.
One visit, and you’re hooked.
Just an hour’s drive from downtown Chicago, the beachfront towns of Northwest Indiana and Southwest Michigan offer the Midwest’s own brand of a getaway in paradise. From as early as the 1900s, nature lovers from Chicago who were in search of a permanent vacation destination made the trek across Indiana to the quiet village of Lakeside, just north of New Buffalo at the Michigan border. Here, luxurious lakefront retreats built by industrialists and University of Chicago professors were informally intermixed with the quaint three-season fishing cottages of working-class vacationers.
Over time, development in Southwest Michigan led to the establishment of Harbor Country – a 15 mile span that runs north along Lake Michigan and stretches six miles inland. In northwest Indiana, a national park and state park as well as other public and private recreational areas share the lakefront with residential and commercial development.
As a result, there are a myriad of short and long-term vacation rental options in the area – along with a good number of “second home” opportunities. While interest rates hover near all-time lows and prices remain affordable in the aftermath of the housing bubble, it’s certainly a great time to “invest” in a vacation property.
Owning a second home means you have your own private getaway, the perfect setting to enjoy family time as well as welcome other guests. Plus, with technology making it easier to work from remote locations, people are finding they have even more opportunities to enjoy their vacation homes than ever before.
While it would be ideal to be able to afford a second home for your own exclusive use, the reality is that many people find it necessary to make this particular purchase an investment. With today’s low interest rates helping make the possibility of becoming the owner of an investment property more attractive, there are a few things you should know about buying and renting houses.
For starters, those who are already in the game suggest renting a number of properties before actually buying one.
Monica O’Donnell who handles both sales and vacation rentals for the family-owned and operated Executive Group Realty of Indiana & Michigan agrees.
“You really need to see what you’re getting into from a business standpoint,” she explained. “Since you’re going to be using the place as well, you’ll want to check out several different neighborhoods, and, from an investment standpoint, it’s important to remember ‘the more you sleep, the more you rent.’ Ideally, you’re looking for something with at least four bedrooms that can comfortably accommodate a minimum of two families.”
In order to make the economics of owning your dream vacation home more attainable, carefully research the feasibility if you operate it as an investment property business. In order to do that, you’ll need to start with solid estimates of all the monthly costs including, but not limited to, mortgage, insurance, property and sales taxes, promotional costs, maintenance, repairs and cleaning. Then, you will need to estimate how many weeks the property will likely to be rented. The best way to get an accurate picture of the demand and income potential would be to engage real estate brokers, property managers and other property owners in the area about their experience with rentals.
“Probably 90 percent of our business is from Chicago, people looking to getaway for a week or weekend,” O’Donnell said. “Just as the rule of thumb for property owners is to keep the distance less than two hours, these vacationers are looking to maximize their leisure time with just a short drive. Michigan does a great job of promoting their beautiful beaches in Chicago with the ‘Pure Michigan’ campaign, but once people see our beaches here in northwest Indiana they are in awe.”
With that in mind, she also stresses the importance of knowing the different “rental rules” for individual communities.
“Everyone has different goals when it comes to renting a vacation home,” O’Donnell added. “For some people, weekly rentals just five or six times per year to help pay those property taxes without a homestead exemption and cover some of the other expenses is enough. In northwest Indiana we have communities that only allow you to rent by the month or have one renter every 30 days up to five times a year, so it’s important to know what your goals are from the start.”
Because there are many issues that go along with becoming the owner of a vacation home – from different tax implications depending on whether the home is considered a second home and or an investment rental to all the details of managing the property for yourself and potential renters – it’s essential to seek out reliable advice and guidance every step of the way.
But, if you’re like countless others before you who got swept away by the allure of watching the sun set behind our nation’s third largest city while you’ve got your toes buried deep in the sand, a vacation home can be very achievable right now.