Historically, real estate has been a sound and sensible investment. A second home in today’s market can reap benefits in the short-term and long-term. Learn why a vacation home is a productive investment in our simple explainer.
Rental Income
One of the primary benefits of owning a vacation home is getting an immediate return on your investment with rental income if you rent it out. The supplemental income from renters can go a long way toward paying off your vacation home mortgage.
Whether you manage the property yourself or use a property management company, there’s plenty of opportunity for substantial renter’s income if your home is in a good location. Plus, rental companies like Airbnb and Vrbo have made attracting and finding guests more straightforward.
Tax Benefits
Another prime benefit of owning a second home is tax breaks and benefits. Tax laws change, but there are many deductions second homeowners can utilize, like the mortgage interest deduction. This allows most tax filers to deduct the interest on their mortgage for up to $750,000.
Even if you primarily use your vacation home as a rental property, in most cases, there are plenty of expenses you can write off, such as:
- Rental expenses
- Mortgage interest
- Property taxes
- Home equity loan interest
Property Appreciation
Real estate investment has typically always been a good investment because it’s usually a safe bet in the housing market. There’s no guarantee your home will appreciate, but looking at the housing trends across the country in the past couple of years and decades, the value of a well-maintained home is a good wager.
Many people invest in vacation homes in Florida, where the real estate trends are strong and the outlook impressive. A real estate property with steady appreciation is one of the best assets one can have in their portfolio.
Future Retirement Home
Whether you’re 25 or 65, it’s always wise to think about retirement. Where to live is a big question, and a growing trend is people buying vacation homes, renting them out for a few years, and then retiring and living in them after.
The renter’s income can help pay the mortgage for the second home, and once you retire, you can use the money from your other home’s sale to pay off the rest if needed. It’s an intelligent strategy that lets you enjoy your golden years without worrying about paying for a mortgage!
There are many reasons why a vacation home is a productive investment, from the potential passive income to helping your future retirement plans. If you’re sound in your research and find the right home, your real estate investment can pay dividends while also being a great vacation spot for your friends and family.