Building a vacation home portfolio

[Nick P.]

Hi all- Very new to the investing game and could really use some guidance. Long story short - my girlfriend and I are love to travel and love to reside in coastal cities. We currently live in the northeast and have contemplated a move to the south east for some time. However, we are unsure if/when that move will take place. We are currently renting a town home and would really like a place of our own. Ideally- the long term goal would be to own a handful of vacation homes to use for our own pleasure. We would rent them when we are not there, but the motive would be more for our vacation needs than to cash flow ( at least that is what we are currently thinking). 

1- Would you recommend buying a house in our current city (have looked at house hacking a duplex) even though we are unsure if we will continue to live here? Is there a particular time frame of when you would suggest not to buy (aside from the FHA loan requirements of 1 year, 2 years for cap gain purposes) ? For instance- if we are only going to stay for say two years, and bought a traditional SFH (no house hack) with the intent to turn into a LTR when we move- would you suggest not doing that due to short time lived in the property? If we didn't rent it out and just decided to sell- would that cause any unforeseen problems?

Edit: would it ever make sense to buy the vacation rental before you buy a primary residence? Use it as a short term rental and continue to rent until you save enough to buy a primary residence? 

Hoping someone has experienced the same thought patterns, heard of a similar situation and just hoping to get some dialogue on what makes sense/best path forward. Open to alternative thinking as well in the short term to get to where we ultimately want to be. Thank you in advance

[Alexa Ferguson]

Hey Nick! I own several short term rental properties and work for a real estate brokerage that specializes in vacation homes. Your plan is great!

There are varying opinions on this, but I would recommend buying your first investment property where you currently live. A house hack would be ideal for this since you can put as little as 3.5% down for your first house. If you went straight to buying an investment property (not your primary residence), you would likely have to put 20% down. Buying where you live would also allow you to self-manage your property much more easily than if you were out of state, so you can get the hang of it while you are close. I would recommend renting the property out when you move, but if you decided to sell in a few years, that would not be a problem.

If you don't want to house hack, you can definitely buy the vacation rental first and keep renting (many people do this who want to stay living in a downtown area, for example, but can't afford to buy there). The cash flow from your STR would likely even cover a portion of your rent! You would just need to put down 20% instead of 3.5%, so it depends how much cash you are wanting to invest or keep liquid.

Hope that helps! I’m based in Colorado, but always happy to help.