Vacation Homes Are More Affordable Than You Think
As you load up the family to go to the lake for the umpteenth season, think about having a house or cabin on the water would give you more quality time together and less time packing and unloading the car. The warmer weather means that homes on the lake or in the mountains are coming up for sale. The economy is firming up and interest rates are still relatively low, so now might be a good time for a second home for family vacations and as rental potential.
Here are some things to consider if you’re interested in buying a vacation home.
1. Consider location. Whether it’s for your family’s enjoyment or for rental potential or both, the location matters. Make sure that you’ve located a spot you’ll enjoy for a few years because flipping a vacation house is difficult, but over a longer term, vacation houses are selling well. In 2016, the median vacation home price rose by 4.2%.
Also keep in mind that even within a neighborhood, the location will determine the property value and it can vary significantly. For example, lake front homes will hold value over homes with an obstructed lake view that’s close by.
The average vacation home is located 200 miles from the homeowner. That’s a long enough distance to mean that it makes sense to pay someone to take care of the house, but small things that you’d otherwise do yourself now can add up and become costly. A vacation home that’s closer to where you live is a good way to keep costs down. The great thing about the New River Valley is that you can find a second home near a lake with a beach, a VT game, or up to a private mountain setting without going far.
2. Buy for the right reasons. Rental income can fluctuate and be unpredictable, so consider it to be gravy to buying the home you’re already interested in. An added bonus is that with the right marketing, if it’s a place you want to spend time, others will want to as well.
3. Deal with renters. If you’re looking to rent the home when you’re not enjoying it, make sure you have plans in place for how to deal with renters. You don’t want to be caught up all summer and fall dealing with needy renters. Plan to devote some time each week to responding to renter requests and managing the property. You can also hire a property management company to take care of the details if you don’t want to and to help make sure you don’t run afoul of local ordinances.
4. Have a rental business plan. Will you hire a rental company or use a service like VRBO? You’ll need great photos for marketing. You’ll also need to be able to take payments online and have a way for renters to get into the home (think about installing a keyless entry system and giving a code that you can change). You’ll also need a reliable cleaning service for in between rentals.
5. Sort out the taxes. In addition to property taxes, rental income is taxable. However, for most people renting their vacation homes on the side, the income is generally not significant after expenses to create a significant liability. Depending on how long the renters are staying and the locality, you may also be required to assess lodging taxes. The rules vary by towns and counties in this area, so we can look into this if you are interested in working with me to find a great vacation home.
To my family, our lake home is a place where my family can gather and memories are made. Generations of the family come and enjoy cookouts and card games and spending time away from our phone and computers and with each other. A vacation home can be a great investment strategy whether it’s rented or not, and right now is a prime time to consider one. You can be with your family and friends at your cabin or house in time for summer BBQs.