A vacation home can be a place for your family to relax and escape the pressures of daily life. Renting out a house can supplement your income and give you greater financial security. Whether you buy a vacation home for personal use or as a rental property, owning a second house can be expensive and stressful.
You’ll Need a House That Fits Your Goals
If you’re thinking about buying a second home solely for your own family and friends to use, you can select any location that appeals to you. The number of bedrooms and amenities should fit your needs and preferences.
If you plan to rent out the house, it should be in a location that draws lots of visitors every year, preferably in more than one season. The property should be spacious enough to comfortably accommodate a family or a group of friends. Certain amenities, such as a pool or hot tub, can make it more appealing to travelers. A house that’s close to popular tourist destinations or public transportation will be ideal for out-of-town visitors.
Owning a Second Home Can Be Expensive
A mortgage, taxes, insurance, utilities and maintenance for one house can be a lot to manage. If you buy a second home, you’ll need to pay all those bills for two properties.
If you rent out a vacation house, you’ll have additional expenses. The house will need frequent cleaning and maintenance. You might also have to pay for professional photos, online advertising and property management. Those costs can quickly add up.
There’s no guarantee that you’ll bring in enough money to cover those expenses. Even if you buy a beautiful house in a popular area, you might face stiff competition from the owners of other rental properties, or tourism might decline because of bad weather or an economic downturn.
Your Taxes Can Get Complicated
You’ll have to pay federal taxes on money you earn renting out a vacation home. Some states and cities also impose taxes on rental income. An accountant can explain tax laws and tell you which rental expenses you can write off to reduce your tax liability.
You Might Not Be Allowed to Rent Out a Second Home
When it comes to short-term rentals, local rules vary. Some cities want to promote tourism and make it easy for people to rent out their houses. In other areas, year-round residents don’t want their city to be inundated with short-term visitors, and local laws make it hard for owners of vacation homes to rent them out.
Weigh the Pros and Cons
Owning a vacation home can give your family the opportunity to get away from it all whenever you want, but that flexibility comes at a cost. Renting out a vacation house can boost your income, but it’s not as simple as people sometimes make it out to be. Before you move forward, think about your goals and research popular tourist destinations, local real estate markets, restrictions on short-term rentals and tax laws.
