4 Ways to Make a Vacation Home Investment Pay
Do you take a yearly holiday ski vacation? Or, do you run to the beach, every chance you get? If you do either, it’s likely that you’ve thought about buying a vacation home—if only it would boost your finances at the same time.
The truth is, vacation home investments can be tricky, especially in the short-term. But, for many, there is a way to find balance between profits and having a special place to build family memories, over the years. There are ample circumstances in which a vacation home investment becomes truly worthwhile:
- You have a surplus of cash and a lot of patience. During a market lull, you can easily find resort properties for reasonable prices. If you have the money to make a sizeable down payment and the confidence that the local property values will revive in good time, you can sit on the property, enjoy your vacations there, recoup some expenses with short-term rentals, then sell early in the revival, before developers skew numbers again. Or, just ride it out.
- The property appeals to “event renters.” What kind of destination is your prospective vacation home in? Does it attract groups of people for weddings, conferences, family reunions, etc.? Can the investment property accommodate larger groups? If so, you may be onto something. It’s cheaper for members of a group to rent this way, and it still brings you a decent return.
- Selling your current home won’t give you much capital. You might be moving from a resort area or popular vacation spot and in the current market, you can’t sell that home without taking a hit. It will likely be more profitable to market it as a vacation rental until the market improves (if you have the energy or resources to appropriately manage it). This often proves more lucrative than signing a longer-term lease with a local tenant.
- Maybe you want to retire there, eventually. It’s not unusual to dream of living out your days in the place where you’ve enjoyed so much leisure. Knowing that you want to do that allows you the luxury of time and patience. You can wait for an amazing buyer’s market and swoop in for the purchase. There are tax laws that can really benefit you in this scenario—allowing you to occupy the property up to 14 days a year, but subsidizing your losses when rents don’t cover costs.
Investing in a vacation property simply requires that you act deliberately—not impulsively. If you want to make it a reality, just take your time and consider your circumstances.