Do Vacation Homes Make Smart Investments?
Do vacation homes make smart investments? It depends on who you ask. Maximum Exposure Real Estate opines, “Buying a vacation home is great for a number of reasons. Not only does it serve as a great place to spend time away from the world, but it also works as an excellent investment for you as well.
Noted financial advisor Dave Ramsey said, “The idea of owning a second home is tempting. You can buy it near your favorite vacation spot or in your own city. But the truth is, for a lot of people, the purchase of a second home is a bad idea. Real estate is riskier than most people realize—and it’s not just about the money you tie up in your property.
Do Vacation Homes Make Smart Investments? The Pros and Cons
- A great place to spend time away from the world. Returning to the same place time and after time can be comforting as you become familiar and comfortable with the location. It allows you the freedom to be yourself and the opportunity to expand long-term friendships with residents – you can become part of the social fabric.
An excellent investment for you.
While all assets fluctuate in value in the short term, vacation properties are more likely to retain their value and appreciate because they are located in popular areas with a geographically limited supply.Rental income.
If you decide to rent your home, but personally use the property as well, you’ll need to determine whether you’re eligible to deduct operating expenses. To resolve this issue, add up the days you rented the property. If you occupied the property fewer than 10% of the days, you rented it or for less than two weeks – whichever is greater – you can deduct all of the operating expenses of the home, including interest, utilities, cleaning fees, lawn maintenance, and management fees.
Cons
There’s the money
Most people simply aren’t in a position financially to buy a second home. According to the Census Bureau, two-thirds of today’s homeowners have a mortgage on their current homes. Jumping the gun and purchasing another property before your primary residence is paid off simply doubles your risk—even if you plan to rent it out when you’re not using it.It takes time and hassle
How much time do you spend on the upkeep of your home? While a second home may not double that time, it can mean many more hours and headaches than you think. Dave Ramsey said, “If this is a vacation home that will remain unoccupied most of the time, just imagine the damage a burst water pipe could cause if it goes undiscovered for weeks.Your vacation spot is also an easy target for vandalism and burglary
You’ll need a top-notch security system and insurance designed to cover damages that are more common in vacation homes.Are we going to the mountains again?
If you are paying a significant amount of money each month for a second home, you may feel that you need to regularly and exclusively visit the property to justify your investment. How much time do you have for vacations? Do you want to go every year to the same place?You are vulnerable to the economy
Before the last recession, Canadians and U.S. citizens purchased second homes in Mexico. They may have used their home equity to do so. When the recession hit, they were forced to sell their homes In Mexico at bargain-basement prices to prop up their finances in their home country.
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