How to Own a Piece of Paradise

Going to the Islands for the holidays? You might want to consider staying. Here are some tidbits on buying an island investment property so it can be a breeze.

Many investors dream of owning investment property on a fabulous tropical island, yet the seeming complexities of the transaction burst their bubble. Although your ultimate dream-home might be thousands of miles away, the transaction can be accomplished much closer to home.

More and more, people are looking far away for that lavish second home. St. Thomas, St. Johns, Bermuda...each location has its own challenges that individuals should not attempt to navigate alone.

Here is overview advice on how to view your purchase, how to find a lender and lawyer, and why paradise can become a very real possibility.

Shopping: Shop for your tropical retreat on the Internet, stringing together a number of properties and appointments before you make a visit. Give yourself some time, then visit again.

Financing: Use a local U.S. lender with contacts on the island. There are some island lenders, but they are awkward to deal with, high-priced, slow to process a loan, and offer only certain types of loans. Appraisals are far more expensive and can take more than three weeks.

Legal: Use a lawyer on the island where your property is located. It pays to take time and shop around for recommendations of island attorneys who will work with you via telephone, fax, and overnight mail. Your finance company should be able to help.

Insurance: Make note that you will need hurricane and flood insurance. The cost can be upward of $5-10,000 per year. The insurance is required, so it is best to know your costs early.

Closing: You can close your loan here in the States. This is called a Mail-Away Closing. All the papers are prepared at the lender's office and forwarded to an escrow agent who will monitor the signing of the documents and return them for completion.

Later: Are you planning to rent your dream home while you're not there? If so, check the tax rules. Ask your Realtor to make certain that you can rent it out, and get good insurance. Final Advice: Do not count on rental income to make your payments.

Knowing a few of the realities of purchasing your piece of paradise can make your dream-home come true.