Buying a vacation home is one of the few investments that offers both financial and personal rewards. It also allows you to diversify your income, increase your wealth, plan for retirement, and, obviously, vacation at no extra cost to you. You should know the purpose of owning a vacation home so that you can focus on your search and match your investment with your priorities.
Have a quick look at the pros of owning a vacation home,
Potential rental income
Possible property appreciation
Tax benefits and incentives
Ability to furnish and renovate as you like
Convenient gathering for family and friends
If you’re waiting to purchase a vacation home, here are few reasons why you should do so:
Diversify your income
When you buy a vacation home and plan to rent it out, it will give you a short-term rental income. This rental income could be like a salary or other interest bearing income you get. It’s good to work with an agent who has the local expertise and vacation rental savvy. The agents can help you buy a vacation home with a good cap rate in a great market.
Build equity and wealth
When you buy a second home, you actually join the group of savvy investors who really have a good knowledge of real estate. Your home can be an investment property or a big gift you give for your family.
You don’t have to pay cash when you buy a vacation home. More than 70% of people who buy a vacation home will invest through some form of financing. By hosting short-term rental guests, the mortgage, property taxes, HOA fees, and home maintenance costs can be paid.
If you own any real estate property, you will see an increase in equity or appreciation. In simple words, real estate values rise with inflation. Due to continuing inflation in the U.S., vacation rental property owners can expect the rise in the value of their property to rise over time. In short, holding onto your rental property long-term is one of the great investment strategies.
A vacation rental property is considered a business. So there might be substantial tax benefits. The rental property owners can deduct mortgage interest, maintenance and repair costs, property management fees, etc. The tax laws will differ for every state, so make sure you know well about your state’s laws and plan accordingly.
Place for Gatherings
When you spend quality time with your family it will be a lifetime moment to cherish right? A vacation home could be the perfect place to get together. Gather all your loved ones at the vacation home for a holiday or family reunion. Investing in quality time with family and friends is important as financial investments.
Prepare for Retirement
A vacation home gives buyers a place to retreat when their retirement has come. When retirement hits, the first home can be sold and the earned profit will go towards the mortgage for a vacation home or new renovations. A second home gives the buyer an amazing start on retirement and creates an easier transition to retirement.