Why Buy a Vacation Home?
The reasons to own a second home go beyond money. When you buy a vacation home, you give yourself the freedom to travel as you please in retirement—a well-deserved pleasure after years of working. You have a lovely place to host your family during the holidays, a new community to enjoy, and the potential to earn income from your property.
While a vacation home isn’t right for everyone, it’s a good choice if you enjoy travel and do it often enough to warrant buying instead of renting. You should be able to comfortably afford the mortgage payments and upkeep without dipping into your retirement savings. Personal Capital recommends thinking about things like how much time you’ll spend there and how much debt you have before buying a vacation property.
How Do I Find the Right Vacation Home?
Once you’ve decided to take the plunge, it’s time to start looking for the perfect vacation home. You’ll be spending anywhere from several weeks to several months in your second home every year, so it’s important that it suits you.
First, decide if you want a single-family home, a townhome, or a condominium. Ideally, you’ll be spending more time outside enjoying the destination than in your house, so you can get by with a smaller footprint than your primary home. However, you may want extra space for hosting family and friends.
If you plan to rent out your vacation home or to sell it someday, it’s important to buy in a market that’s popular with other vacationers. This consideration is part of the reason why Florida is such a sought-after destination for second-home buyers. Not only is it sunny and beautiful, but thanks to its popularity as a vacation destination, buyers can rest assured that their investment will appreciate with time.
How Can I Make My Vacation Home an Investment Opportunity?
Renting to other vacationers is a great way to turn your second home into an investment opportunity, but it’s not as simple as sticking a “For Rent” sign in the yard.
If you plan to rent your vacation home for more than two weeks of the year, you’ll have to report the income to the IRS and pay taxes, which reduces the profit you see. You’ll need to budget for additional insurance and cleaning crews between renters. And since you’ll be living elsewhere, budget for a property management agency to tend the rental. However, even with these considerations, renting out your vacation home can be a sound financial choice in many ways.
For one thing, you could purchase your getaway property with an LLC, which provides tax advantages and protects your personal assets. Online services make it easy and inexpensive to form an LLC, walking you through just five steps, so there is no red tape to wade through or an attorney to hire.
You may also choose to sell your vacation home after several years. Unless you’ve used the home as a primary residence for at least two years, you’ll have to pay capital gains taxes on the profit.
A vacation home may be a luxury, but after working your whole life, it’s a luxury you’ve earned. To keep your investment as cost-effective as possible, shop for a vacation home in a destination with a lot to offer—both to you and to potential renters. By making smart choices when buying, your vacation home can become a path to a more financially secure retirement.
When it’s time to advertise your vacation rental, Luxe Living Vacation Rentals is the place to go! Connect today to learn more about how we can help your investment be a success.