People flock to Santa Cruz for vacations from across the country. Investing in a vacation rental in this area is a good choice, because there is almost always a market for your property. However, you need to know how to do this before jumping into the investment arena, or you could end up making costly mistakes.

Check into Zoning

Santa Cruz is somewhat famous for its strict building codes. If you are going to be renting your vacation home, you need to check into the zoning of the neighborhood or home you are considering. If a home is already being used as a vacation rental, this is not a concern. If, however, you wish to take a home that is currently not being rented and turn it into a rental, check zoning first.

Choose a Good Location

Vacationers want to be near the beach, shopping centers, and dining establishments. As you choose a home to buy as a vacation rental, keep the location as one of your first priorities. A home along the beach or other popular tourist spot is a great choice, if you can afford it. These homes bring higher rental prices since they have such a great location. There are other aspects of location, such as close proximity to schools, which would not matter when buying a vacation rental as opposed to a primary residence.

Check the Rental History

If the home has been rented in the past, look into the rental history. If there were periods that the home has sat vacant, find out why. You may find that there is something that makes the home less desirable to renters. If the home has had a solid rental history, you are likely going to find it easy to rent. There are, of course, valid reasons for a long vacancy, such as a period of time when the owner did not market the property.

Get Financing

Getting financing is the tricky part about buying a vacation rental. You will want to have financing in place before you begin seriously looking for a property, because you will need to act fast when a promising location hits the market, so get pre-approval for your mortgage.

You will need to decide whether you are going to finance the home as a second home or an investment property. Second home mortgages do not account for any potential rental income, so you must already have enough income to qualify for a second home mortgage on your own. The rates on these mortgages will be similar to the rates offered for traditional mortgages.

Investment mortgages do take into consideration the potential for rental income. They also account for the risk that you may not be able to find tenants. This means the interest rate is going to be higher. It also means, however, that the bank does not expect you to already have the income necessary to pay for the mortgage.

Once you have your financing in place, all you need to do is find a property, make an offer, and purchase it. Then the real fun of renting the property and seeing your income come in begins!