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Are Vacation Homes a Good Investment?

Are Vacation Homes a Good Investment? | Billy Houston Group Blog

At one time, vacation homes were thought to be a luxury only afforded to the rich and famous. Times have changed though. Empowered by recent economic growth and the rise of rental management platforms like Airbnb and VRBO, many homeowners are investing in a second property as a permanent vacation home or income opportunity.

A quick Google search will provide lots of opinions on the topic of investing in vacation homes. Many financial advisors are 100% on board with owning a second home while others are more cautious in their stance. Before you jump into the deep end and buy a vacation home, here are some things to consider when determining whether or not owning a vacation property is right for you.

Can you afford a vacation home?

Probably the most important question you need to answer is, “Can you afford a vacation home?” Over extending your finances is never good for any purchase, but purchasing a second home without a sound budget could have disastrous results. Research the area you’re considering thoroughly to better understand taxes, utility costs and other hidden expenses that may occur. If you’re financing your vacation property, be sure to consult a mortgage broker so you know what you’re eligible to borrow.

What do you expect from your vacation home?

Do you want your vacation home to be a rental property first or will your family be using it for a significant portion of the year? Having a place to get retreat whenever you want is a great thing, but if you intend to spend lots of time vacationing at the property you also want to rent, the potential for rental income will be impacted.

With the rise of platforms like Airbnb and VRBO, lots homeowners have found success by turning their vacation homes into an investment property. Vacation rental platform HomeAway reports that 54 percent of users were able to recoup up to 75% of their mortgage with rental property income. There are also tax benefits to using your vacation home as an investment opportunity. Many of the expenses associated with owning a rental property can be written off as business-related expenses.

Some homeowners choose to manage their rental property on their own, but with that often comes with its own set of challenges. To help manage the seemingly endless cycle of scheduling, record keeping and property maintenance, owners will turn to a property management company. At the beginning of 2020, over 23,000 vacation rental companies operated in the United States. Of the 23,000 companies, 70% of managed 1-19 rental units.

Is a vacation home a good investment?

The short-term rental industry brought in $87.09 billion in revenue during 2019 so it’s no surprise that many people are seeking to capitalize on owning a second home. However, shrinking home inventory across the United States has made it more difficult to locate and afford desirable rental homes. Finding the right vacation home could take longer, but your real estate agent will do most of the search work on your behalf. If you have the resources available to purchase a vacation home, the benefits definitely outweigh the negatives.

Are you ready to buy a Tennessee vacation home?

The team at the Billy Houston Group has the knowledge, network and experience to help you find Tennessee vacation homes for sale. Reach out to us today at 865.577.SOLD to discuss your goals and budget. We’d love to get to know you and help you achieve your vacation home dream! Don’t forget to follow us on Facebook!

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One Response to “Are Vacation Homes a Good Investment?”

  • I appreciate what you said about how rental properties can be subleased through multiple platforms. I need to get a condo for passive income. I’ll have to check out which platforms are easiest to work with to make money on the investment.

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