Should You Buy a Vacation Rental?
Have you always dreamed of owning a vacation home? Are you thinking about going after that vacation rental investment? What would that mean for you, your family, and your financial future?
Ryan Haley shares the top reasons why a vacation home is a great investment opportunity for you.
There are keys to owning a property and benefits that many do not necessarily think about. When it comes to buying and owning a rental vacation property, the first thing that you get is rental income.
The location and the amenities that come with the property will determine the rentability and the kind of rental income you can take in from that property. This factor is probably the number one most requested information type item when it comes to helping a buyer decide if they should buy a rental investment.
Personal Use of the Vacation Rental
There are other things you should continue to consider over and above that rental income potential, and one of those things is your personal use of the property.
If you intend to buy a vacation rental, it’s best to buy something that you like. Remember that this is not an investment in a college town or anywhere in the U.S. that you are not going to use. Most people are going to use these properties from time to time.
First and foremost, you would want to buy something that you have pride of ownership, something that you will like, and at some point, a property that you will want to use. So, when you’re not renting it out or you’re coming down to do work on the property to prepare it for rentals, you’re going to be able to use that rental property. Specifically, a lot of times, it’s during the shoulder seasons—spring, fall, and winter seasons and maybe a week throughout the summer—when you can use it for yourself. For the rest of the year, you will be working on maximizing the rentability of the vacation home.
Another benefit you get is tax depreciation. When owning a rental property, you can depreciate the property over time, thus reducing your tax liability. You’re not only depreciating the property but also any improvements, furniture, and fixtures that you have added.
This is going to be a huge benefit when it comes to your personal taxes year in and year out. It’s highly recommended that you consult with a tax advisor or CPA to determine what exactly those benefits could be.
Typically, real estate taxes and mortgage interest can be deducted from your taxes. Depending on where you fall in the tax bracket, you can take off from your taxable amount your mortgage interest as well as the real estate taxes on the second home/investment property.
Real Estate Appreciation
Another benefit you get for the long term is real estate appreciation. You’re buying this property today at a certain value, but over time, that property will appreciate.
Time and time again, real estate investment—especially for the long term—has returned great value. This has allowed many people to have great upside appreciation that at some point they’re able to cash in and buy another property or enjoy the return on investment for their future in retirement.
These are just some of the top benefits you get when you buy a vacation rental as an investment property. If you have any questions or anything you want to discuss with us, please feel free to get in touch with us and we’ll be happy to talk with you.