Do vacation homes make for a good investment?

Whether a vacation home turns out to be a good investment often comes down to how you plan to use the property. If the plan is to use it primarily as a vacation rental property, income plus potential long-term appreciation gives it the potential to be a solid long-term investment.

Do vacation homes make for a good investment?

Whether a vacation home turns out to be a good investment often comes down to how you plan to use the property. If the plan is to use it primarily as a vacation rental property, income plus potential long-term appreciation gives it the potential to be a solid long-term investment. The big advantage of buying a vacation rental property is the potential rental income you could earn by renting out your investment property. Rental property websites such as Airbnb, VRBO and HomeAway have changed the way people vacation.

Are you a homeowner in a drive-away destination with lots of vacation rentals? Choose Vrbo. Do you have an apartment in a city? Airbnb is probably your best option. Is your rental unique, like a tree house or a houseboat? Consider a specialized site like Glamping Hub. Each Vacasa house appears on several channels, depending on its location and appeal.

For investors, vacation investment properties can generate considerable income, helping them achieve financial independence. Buying a vacation home allows you to diversify your income, accumulate wealth, plan your retirement and, of course, take a vacation at no additional cost to you. Some investors weigh a benefit more than others, but once you're clear about why you want to buy a vacation home, you can focus your search and match your investment with your priorities. Before you even consider buying a vacation rental property, there are a few things you should find out.

You want to work with an agent who has the local experience and knowledge of vacation rentals to help you buy a vacation home with a good capitalization rate in a large market. Your enthusiasm for owning your own vacation home can fade away when you realize the risk involved and the expenses associated with owning some properties. Although buying a timeshare usually much cheaper than buying your own vacation property, it can be difficult to sell it if you don't want it anymore. Your vacation home is considered a real estate business if it is rented for at least 2 weeks a year or more for tax purposes.

Demand for your vacation home can change based on weather, market patterns, local events, and regional competition. When you buy a vacation home and decide to rent it, it's possible to create a new short-term rental income stream. If you buy one for personal use, you may feel like you are wasting your money when you don't use it or if you want to go on vacation somewhere else. So, here are a few things that every prospective vacation rental buyer should know before making an offer and starting the process of buying a vacation rental property.

Average buyers use vacation homes primarily for personal stays, renting them an average of 30 days or less per year. Once you've made your vacation home investment, it's time to start marketing your property and fill your calendar with as many bookings as possible. As you approach retirement, the amount you owe on your vacation home mortgage will be lower or paid in full. Some experts will say it's best to buy your vacation rental during the off-season because that's when you're most likely to get a good deal.

Shawna Fluellen
Shawna Fluellen

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