Vacation property has never been in greater demand. Recent social distancing rules have families scrambling to find local getaways to which they can drive without air travel mandates. For the past few years, vacation rental property has been a good investment, and many properties are under agreement the same day they list.
Those investors considering purchasing a property of this type for the first time should be aware of some unusual aspects of many waterfront and rural properties and parcels.
Private Roads – Do You Really Have Access To Your Property?
One thing any investor might assume is that the vacation rental property they are interested in can be driven to via the road it’s on, or any nearby connecting street. However, in many rural areas, vacation rental properties are not on public roads, but rather private roads or accessways.
These private roads have a plethora of legal catches that only a good lawyer can sometimes decipher. The first thing to determine is if the access road is actually a road or not. It may not be. It could be simply a path that a developer created at some point.
Perhaps during a neighborhood expansion project or when a landowner subdivided one large parcel. If the access road is not actually a road, you will need a guarantee that you have access to the property legally.
If the road is a private road, the town is unlikely to maintain it. So, if a tree falls across it, who will remove the tree? Who will plow in winter? Who will replace the road if a culvert washes away during heavy rains? There is often an informal neighborhood group that arranges for this. A vacation property I own has this arrangement.
Our road is maintained by Steve, one of our quaint community’s seasonal residences. If Steve is away, we are on our own. We have a couple of backup contractors we can call, but there are no guarantees. As an Airbnb host, you need to consider carefully how your weekly or Airbnb tenants will access the property you hope to rent.
Many private roads leading to vacation property are seasonally maintained. That means that they may not be plowed in winter. Regardless of whether you plan to use the property in winter, you should still be aware that obtaining homeowners insurance is tricky when the insurer can’t be sure that first responders can access the property in winter.
An easement is a legal guarantee that a person, entity, or municipality can access or use a person’s property for a specific purpose. Easements fall under the category of encumbrances.
For example, one vacation community near my home was built adjacent to a farm. When the property was subdivided and developed, the contractor agreed to allow the farmer access for his animals to water at the public beach if need be. Other easements help you as a homeowner by granting you access to your property via that private road we spoke about above. These are called easement appurtenant.
Easements can be beneficial to you as a rental property owner. However, you should carefully scrutinize any that are easements on your property or parcel. For example, if you own waterfront property, other nearby property owners may have the right to travel across your property to access the waterfront. It is important to know how this might affect your privacy and the enjoyment of your vacation rental property.
A prescriptive easement is one in which a person uses property belonging to another person. If the use is obvious and occurs over a long period of time, the user can legally use that property. If this is happening to you in either way (you using someone’s property, or they yours) a lawyer can help you to work out an arrangement that makes the most sense.
Setbacks are rules or requirements imposed upon property owners. The general idea is that they restrict what you can do on your property and where you can do it. For example, a municipality or government agency like the department of environmental protection may impose setbacks on waterfront property.
Examples include requiring that new structures be built a set number of feet back from the high water line. If you buy a waterfront home and plan to do any additions or major renovations, it is wise to understand how setbacks might limit your plans.
Waterfront communities often have small parcels. These parcels may have setbacks that make it difficult to place a hot tub, gazebo, kennel, shed, or garage on the property, not to mention larger things like tennis courts. There may even be setbacks for things like a bocce court. If your property is encroached upon, this can help you. If you plan to add outbuildings, setbacks can restrict what you do.
Many older vacation properties were built as small one-story cabins. It is quite common for subsequent generations of owners to want to expand the living space of their beachfront property. With rental property, this is especially true. Adding space vertically may add bathroom and bedroom capacity, making your home more valuable and bringing more rent.
Height restrictions can help you to ensure your view is not blocked by a neighbor’s expansion, but they can also hold you back if you wish to add a story. Knowing the rules, particularly on buildings that face water on a hillside, is an important part of your due diligence when purchasing a vacation rental property.
Zoning and Possible Changes
If you visit a vacation rental property on a summer Sunday holiday, you may see, hear and smell what you expect. However, on a workday, you may be in for a surprise.
Zoning laws are deed restrictions on what can and cannot be done on a property. They are never fixed in stone, but they do help you understand what could be built nearby. For example, in a rural area, a parcel near yours zoned for general use or commercial use might become a shooting range. Or a sawmill. Or a sand and gravel operation. There may be one nearby already.
Farms also have many protections from zoning laws, particularly pre-existing farms (which is usually the case). The odor from fertilization and animal processing can be quite a surprise to a rural vacationer. Since the farms almost always pre-date the vacation homes, they are well within their rights to make the food we eat. Be sure you know what is around you is the general idea behind understanding zoning.
Mashvisor’s Recommendation – Be Sure
Mashvisor is the best place at which to research vacation rental properties, evaluate rental properties for return on investment and cash on cash return, and compare rental income potential. Once you find a vacation rental property in which to invest using our tools, make your sale contingent upon a review of the deed and the deeds of surrounding properties to ensure that the property has reliable access.
Also, include language that your buying agent or attorney can draft that allows you to back out of the deal if any easements, variances, rights of way, setbacks, or private access road difficulties are uncovered.