Why are vacation rentals a good investment?
You can get more R&R (reservations and rental income, that is)
The biggest advantage of investing in vacation rental properties? The opportunity for extra income and revenue stream. Vacation rental websites such as Vrbo, Airbnb, and Booking.com attract legions of travelers seeking authentic local experiences and roomier accommodations. Investing in the right vacation property has the potential to bring healthy profits, especially when you purchase a vacation home in a popular destination and upgrade the property with income-boosting amenities (think hot tubs, special interior design choices, etc.).
The income you make from reservations can help offset mortgage payments and other expenses, including insurance and property tax. We suggest working with a real estate agent who’s an expert in both vacation rentals and the local market to help you find a vacation rental property that can produce a great cap rate.
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You may have a future retirement home or a sizable nest egg
Investing in a vacation home is a way of putting stakes down for your future. It can be a smart strategy that ensures a healthy financial foundation for you and your family down the road, no matter how close (or far) your retirement is.
Real estate values tend to increase over time, especially in in-demand travel destinations. You may be fortunate enough to find that by the time you reach retirement age, your vacation home’s value is up and your mortgage payments are down (or completely paid off). At that time, you can kick back and enjoy the retirement you’ve hustled hard for. Or, there’s the option to sell, then use the earnings to fund your living costs, healthcare, travel and more.
You could see steadily soaring home values in top vacation destinations
When you invest in the right vacation rental in the right place, it’s possible you’ll see a significant increase in value and equity over time. Compared to residential real estate, vacation rental properties can increase fairly rapidly.*
Before making the investment, work with a savvy real estate agent to review past and current trends in the destination where you’re hoping to buy a short-term rental property. What’s happening to home values in that location? What about the home values in nearby areas? Then, invest in upgrades and improvements to push up its market value even further. These modifications can attract more guests and result in more compelling reviews.
You get tax write-offs
A vacation rental investment is much like your primary residence. You may write off expenses related to mortgage payments, property taxes, rental income, insurance premiums, and so on. But, how you use your investment property, and how often you use it, can impact what expenses you deduct.
For instance, if you rent out your second home for more than 14 days a year, you may be eligible for vacation rental tax deductions. We recommend reaching out to a CPA to help you understand the vacation rental investment tax codes and tax laws for your state and your situation.
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You have your very own place to get away
Want a multitasking investment that makes you money and memories? A vacation home can do both. Invite the family over for a long weekend. Host the next group ski trip. Escape for a romantic getaway. If you want to maximize your revenue potential, you can rent out your vacation rental property for the entire busy season and make personal visits only when demand is slow.
Whether you want to unwind or entertain, it’s up to you. If you partner with a vacation rental management company, make sure they give you the flexibility to stay whenever you’d like, and for however long you’d like, without restriction.
Want to maximize your profit potential when investing in vacation rentals or need help navigating your options? We’re here to help.
