3 Myths About Buying a Vacation Home
Written by
Karen Doyle
Edited by
Cory Dudak
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Real estate is almost always a solid investment, and if you already own your primary home, you may be thinking about buying a vacation home — either to use for your own enjoyment or to rent out for income (or both)!
Here are three myths about buying a vacation home.
You Need a Fat Down Payment
While a vacation home purchase usually requires a larger down payment than a primary residence, the required amount may be less than you think. You can certainly buy a vacation home with 20% down, but you may also qualify to put just 10% down. Further, if the vacation home is to be used an investment property, the down payment will likely be greater, per The Caleb Pearson Team, a realty group.
The reason for a larger down payment on a vacation home is simple, when you look at it from the lender’s perspective. If you have a mortgage on your primary residence and one on a vacation property, and you run into financial trouble, which one are you going to stop paying first? The vacation property, most likely.
Renting Out a Vacation Home Is Easy
It’s actually still somewhat complex to rent out a vacation home, even since the advent of Airbnb and VRBO.
“Sites like VBRO, HomeAway and Airbnb have made renting out vacation rentals much easier. However, renting out a vacation or second home is not as simple as it seems. While renting out your vacation home is a great opportunity, you must run it like a business. And remember, there are more expenses than just the mortgage payment and possibly HOA dues. Utility payments and amenities like internet and television services add to the monthly expenses and are desirable features to prospective renters,” The Caleb Pearson Team explained.
There are tax implications to consider when renting out your vacation home. However, if you rent it for 14 or fewer days in a year, you don’t need to report the rental income when you file your tax return, according to Charles Schwab. That being said, if you do opt to go this route (of renting it for 14 days or less), any expenses affiliated with the vacation home being used as a rental property may not be deducted from your taxes.
A Vacation Home Isn’t That Much Work
Any home is a lot of work, and one that is only occupied some of the time can be more work as you have to secure it when you’re not there. Plus, you may not notice small problems until they become big problems if you’re not living in the home every day.
You can stay on top of the work involved in maintaining a second home in a couple of different ways. You can create a regular schedule to visit and inspect the home even when you’re not vacationing there, so that you can handle any issues promptly. Or, you can hire a property manager to visit the home and take care of any needed repairs in your absence.
Buying a vacation home may mean more responsibility, but it can have a positive impact on your life — and your net worth — if you go into it with the above in mind.
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