Click here to get this post in PDF
The growth of vacation homes over the past 10 years has been undeniably impressive. This change has ended the debate on whether or not vacation homes are kicking hotels to the curb. In two words, THEY ARE. It is no surprise that things like this are a topic of discussion. Vacation homes are preferred because of their ability to accommodate, the privacy they provide, the value per square footage, the amenities of a home and fewer restrictions for the guests. While the demand for vacation homes is increasing, more people are investing in it as well. Investing in vacation homes is no doubt a profitable move but it’s crucial that you also understand the risks.
Perks of investing in a vacation home
Here are the perks of investing in a vacation home:
An additional source of income: The main reason for the spike in the investment in vacation homes is the fact that it has proven to be a multibillion-dollar industry. Investing in this field could serve as a side-hustle that can very easily become a full-time income. Airbnb reported that the income generated by an average host on the platform amounts to about $11,000 a year and yearly rental revenue per property on VRBO is reportedly double or triple that amount with as much as 33,000 per property per year. This highly attractive revenue could also serve as a long-term investment, as the need for vacation homes keeps growing and the return on investment is also very reasonable.
Appreciation of assets: When you make that purchase for your vacation home or perhaps use a home you had long acquired, the chances that its value will increase in the future are very high. Hence, vacation homes not only serve as a profitable investment but also almost guarantee future returns on the overall value of your home.
Personal use: Investing in a vacation home can earn you a good amount of money, but who said you couldn’t use it for personal use? You can simply block out your dates and use your own rental to catch up on some binge-watching or to create memories with the family when you want to get away. This way, you get to stay in a place you know and love while your beloved cottage earns you cash instead of sitting empty. In addition, your guests now cover your mortgage and maintenance.
Disadvantages of investing in a vacation home
Despite the amazing perks of this type of investment, there are still downsides that should be considered.
Tax and unforeseen expenses: Since the law identifies this line of investment as a business, paying tax is mandatory. Income from rental homes should be declared on tax returns where it would be taxed appropriately. Rental homes also come with lots of other expenses like mortgage, utilities, insurance, and hiring of property managers.
Management and maintenance: Just like you would for your personal house, rental homes need maintenance. You would have to pay for repairs and property management. Regular maintenance is required to keep the house presentable for tenants. Fortunately, your rental rates should be covering this surprise bill.
Marketing: People are not going to know about your vacation home if you don’t market it. You have to advertise and reach a good number of people to yield results. Typically, Marketing is not only time-consuming but also requires money. You would have to reach a considerable amount of people online and around your geo-location to see returns on your investment. Hiring rental managers to do that for you can become costly. Companies like Lodgable eliminate the cost of listing on booking sites like VRBO and Airbnb with their “no-cost” distribution program.
How to make things easier
There is no doubt that vacation homes cost a lot – not just monetarily but physically and time-wise. You can reduce the downsides by making use of Lodgable. Lodgable is a property management software that provides management and marketing services for rental properties all at no cost to the host. Save yourself the time and money, start doing less, and start earning more.
You may also like: How to Choose the Ideal Buy-to-Let Property
Image source: Pexels.com
