Owning a vacation home – Part 1Real Estate, Bottom Highlights Thursday, April 30th, 2015
On a glorious holiday to a vacation spot, owning one’s own vacation home might seem a tantalizing prospect. How many of us find ourselves gazing into the window of the local real estate broker just curious as to what it would cost should we take the plunge. There are so many of these homes now being offered for rent on sites such as VRBO and AirBNB that there is that added inducement to purchase a property that can garner some additional income when we’re not using it.
Temptation, yes, but is acquiring a vacation home a good investment? This is a complicated, many-faceted question, and we cannot answer it in this one short article. So we’ll do it in two. In this segment, we’ll look at the pros, and in the next, some of the cons. So here are the upsides for owning a second home, in your favorite vacation spot.
The first obvious pro is that you get to enjoy your carefree vacation time in your most beloved locale. You will have all the things you like around you, won’t have to pack, and can enjoy vacations for years to come.
Second, since most people utilize their vacation homes for brief vacations or weekends, if you’ve a mind to, you can turn the house into a vacation rental business, renting out the property when you are not using it. This income can be utilized for many purposes – to refurbish and enhance the property, add a swimming pool for instance. Depending on how often you rent it, you can seriously offset expenses, mortgage payments, insurance and real estate taxes.
The third benefit of owning your own vacation property is that you can exchange it with other vacation homeowners around the world. You may find yourself vacationing in a villa in Tuscany or an apartment in Paris while your exchange partners lounge on your new pool deck. Joining an exchange Web site is easy and fun, and many report they’ve become friends with their new across-the-ocean visitors.
Last, on the pro side, is the investment value of your vacation home. As you are using the rental proceeds to spruce up the property and add amenities, it is hopefully growing in value. When you either decide to make that vacation home your retirement retreat, or try a new vacation venue, you may just walk away with some significant profit.
Buying a vacation home in an area you are thinking of retiring to can be an especially smart move. You will be making income during the years you are renting it, and simultaneously avoiding paying capital gains taxes when you sell your primary home and your vacation home becomes your primary residence.
In summary, owning a vacation home can be fun, bring families together for holidays, and morph gracefully into a retirement home. But, as we will find out in next issue’s sequel, there are pitfalls and issues, and owning a second home is not only fun, it’s work! As with most things in life, vacation home ownership is a mixed bag.
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