Investing in a vacation home can be a great way to diversify your income, accumulate wealth, plan for retirement, and enjoy a vacation without any additional cost. Whether you're looking for the flexibility of choosing from a variety of destinations for an annual vacation or the reliability of having a vacation home you can always go to, there are many benefits to owning a vacation home. When deciding if buying a vacation home is right for you, it's important to consider the potential rental income you could generate. According to the National Association of Realtors (NAR), most vacation home owners don't rent their properties, but if you need rental income to make mortgage payments, it's best to choose a popular destination with high demand for short-term housing.
You should also talk to your mortgage lender about using your vacation home as a short-term rental property. For frequent travelers, having a home away from home means they have their own space when traveling. With a vacation home, you can also receive tax benefits for mortgage interest and property taxes if the home is used as a secondary residence. Recent figures from NAR show an upward trend in the number of second homes purchased for investment purposes, with rental properties outnumbering holiday homes by a large margin.
When looking for places for a vacation home, set a realistic maximum of how much you are willing to offer in a home. There's more to consider than just the fact that you like the area. For example, if your vacation home will be in a popular area for retirees, you may need to make your property more accessible. If you are considering owning a vacation home with another person or group of people, make sure to plan ahead for any issues that may arise over the years.
If there seems to be an opportunity to meet demand, investing in a vacation rental home can be a great way to generate new short-term rental income and reap all the other benefits that come with owning a vacation home.