Vacation rentals are a smart investment choice. They often increase in value over the years, and the income they generate can help you to offset the costs of owning and maintaining a second home. Plus, they provide you with benefits that you cannot get through a typical rental property (such as a place to retire or visit with friends and family). Here are just a few of the benefits that can make a vacation rental property both a profitable and an enjoyable investment.
Financial Benefits Of a Vacation Rental
Some people will argue that it can be difficult to make a profit off rental income thanks to maintenance expenses and the fact that you can often only rent the house for a portion of the year. However, the fact is that vacation rentals offer you financial benefits (including profit from rental income) that often make owning them more than worth it from a financial stand point. Here are some of the financial benefits that can make owning a vacation rental a lucrative investment:
Rental Income
The most obvious financial benefit to a vacation rental is the fact that you can earn income through the rental of the property. The exact amount of income you will earn, and the amount of time you rent the property out, will depend upon your preferences and upon the property itself. For instance, some people like to rent out their second homes for a few days or weeks a year, while others choose to earn as much rental income as possible.
For most vacation rentals, the break even point occurs when you are renting the home for 30 percent of the year. This means that after about 15 weeks of renting, you will be making a profit off your property. With the help of a good property manager, you can often meet and/or exceed this break even point and earn rental income that will help you offset the expenses of owning the house and give you extra income throughout the year.
See also: Destination Spotlight: Port Aransas, TX
Tax Breaks
Not only do you have the chance to earn income from your vacation rental, but you also earn certain tax breaks from owning a second property. The exact form of these tax breaks will depend on factors such as how often you stay at the property and how often you rent it out. However, you can often deduct your maintenance expenses as business expenses and deduct interest and property taxes. Just check with an accountant about how those tax breaks would apply to your particular situation.
Property Appreciation
Vacation rentals can also be a lucrative investment because they tend to appreciate (gain value) over the long term. Most property purchases will appreciate over time, even with temporary down swings in the real estate market. However, vacation properties are more likely to appreciate because of their locations.
For instance, as land becomes more scarce around highly desirable areas, and as demand for time at these highly popular areas increases, you should see an increase in the value of your property. Plus, as you own the home and pay down the mortgage, you should be able to build equity. The result is that if you are willing to hold onto your property for the long term, you should see a hefty return on your investment.
Intangible Benefits Of a Vacation Rental
The financial benefits of owning a vacation rental are a practical reason to make such a purchase. However, vacation rentals are often preferable to typical real estate purchases because they also offer other, less tangible benefits that add to their value. Here are just a few:
Personal Enjoyment of the Property
Most people buy a vacation rental property in an area that they enjoy spending time in. As a result, the rental serves not only as a source of income but also as a personal getaway spot. Vacations spent in a beautiful and relaxing location, without the worry of transporting all your belongings or spending money on a rental yourself, create a great sense of enjoyment and pleasure. Plus, spending time in one area over the course of several years will allow you to invest in the community, make friends, and forge a rewarding place in the local culture. This type of personal enjoyment adds great value to the property, even though it does not contribute financially to your bottom line.
Time with Friends and Family
Vacation rentals also offer a place where you can get together with friends and family. Many vacation rental owners take some time every year to open up their homes to friends and family, hold reunions or other events, and otherwise connect with loved ones in an ideal vacation spot. This means that your vacation rental can help to strengthen your family relationships while also earning you income, making it a valuable investment on a number of levels.
Retirement Location
If you know where you want to eventually retire, purchasing a vacation rental in that area can be a smart move. For instance, you can earn income from the property while you work, which will help you to pay down the mortgage, make improvements on the house and even put extra money toward your retirement nest egg. Then, when you are ready to retire, you will have a home waiting for you in your ideal location. Plus, you will already know what expenses are associated with the home, and will feel familiar with the area to which you are retiring. The result can be a less stressful and more enjoyable transition to retirement.
Owning a vacation rental can be a lucrative investment. Not only do you have the chance to earn money from rental income, but other financial benefits (such as tax breaks and property appreciation), also add financial value to your property. Add to that the fact that vacation rentals allow you to enjoy a nice vacation area yourself, give you time with friends and family, and serve as a retirement location, and these properties become a smart long-term investment for many people. If you are thinking about entering the world of vacation rentals, consider the benefits that this type of property might offer you and allow More Nests to help you find the perfect place.
No Comments