There seems to be an occasional debate about the value of investing in a vacation home or beach house. Either it’s a money pit, eager to pull you into financial ruin or it’s a great way to have someone else pay your mortgage and all expenses for you while you rake in extra cash each month as youvacation home investing watch your asset appreciate over time. So which is right? Are vacation homes a bad idea and should an investor stick with local, residential rentals?

That’s really the wrong question. It’s not an “either-or” proposition but more of an explanation how the potential investment was evaluated to begin with. There are some things to do and not do but the advice can apply to a local duplex as it can to a beach cottage three hours away.

First, run the numbers. Can you finance the property and leverage as much as possible while still cash flowing each month? Are the vacancy rates in an acceptable range? It’s highly unlikely the unit will be rented all the time so can you handle the period with no cash coming in?

Second, is the property in an area you’re familiar with and can you visit it with a short drive? If you’re looking at potential properties that are streaming on some website with a convincing pitch by a real estate agent but you’ve never been there, it’s probably best to keep your money at home. If you’re near a beach with rentals a popular sight you should know first-hand if the area is popular with tourists or not. Have you spent some time there at the beach and rented from somewhere else? Did you enjoy your time there and was it a good deal? Then it passes the initial test just as with any other property.

You’re familiar with the area. It’s a popular spot, the rent covers the mortgage and your financing terms meet your requirements. There. That wasn’t so hard, was it?