"We've all been on those vacations where we're like, 'I would just love to stay here and live here.'" Gerald Sorensen, Realtor® with Twin Power Real Estate Group and Broker/Owner of Re/Max Home Group in the Cedar Valley, highlights the pros of purchasing a vacation home in his most recent video and we couldn't agree more.
As a property investor himself, Gerald offers advice to other current and potential investors to help them understand the process, advantages, and so much more of owning more than just your primary residence. He has a great deal of insight into not only the investment side or property but, obviously as a Realtor®, the home value and market side of ownership.
Owning a vacation home, while different than owning rental property, offers several of the same advantages of investing in real estate. So, here are 3 reasons why owning a vacation home is definitely the way to go.
You Know What You Get
Owning a vacation home has multiple advantages, but "the biggest pro is that you get to own a place that you absolutely love," Gerald explains.
When you own, you take the guesswork out of your vacation. Unknowns like the proximity of the neighborhood, condition of the beaches, local amenities, and more are moved into the 'don't worry about it' category, freeing your time and energy in order to focus on more important things like keeping your home safe while away or taking care of last-minute details before hitting the road.
Another great feature of knowing what you'll get is the literal you know what you get. You picked the towels and bedsheets. It's your furniture and technology and patio furniture and kitchen appliances.
Nothing is more frustrating than planning a delicious breakfast of muffins and scrambled eggs than realizing, after you've mixed up the batter and whisked your eggs, of course, that there isn't a muffin pan to be found and the frying pan is clearly non-stick and was pushed to its limits several years ago.
A vacation home is just that- home. It's a place where you've already settled in and made it your own. Your pans are just fine and you can enjoy hot muffins and coffee on your veranda every morning if you want to. Nobody's stopping you!
There Are Tax Advantages
Everyone loves a financial advantage, especially when it comes to paying taxes. And. it's always good to know what you can deduct and what you can't. One nice thing about vacation homes is that they offer two different deductions, saving you money on an annual basis.
Just like your permanent residence, the mortgage interest on your second home is tax-deductible as well. Gerald also informed us that "property taxes are (also) tax-deductible...You can get up to $10,000 (deduction) on your first and second home."
Do some research to see exactly what you can deduct for your second home as you may find other deductions as well. Consulting an accountant or tax professional is always a good idea as well when it comes to managing your finances and making a large investment such as a second home.
Vacation Homes Have Great Appreciation
Home values, especially in today's strong market, are on the rise. Appreciation is consistent in the Cedar Valley and has been since the mid-1980s; however, it's important to understand that vacation homes are no exception to this: "The real big advantage of owning a resort property is the appreciation. We've seen giant leaps in appreciation in lake properties even in Iowa and especially in places like Florida and Arizona where they had taken a real drop in price but they are definitely climbing now."
According to the Federal Housing Finance Agency (FHFA), home values have increased roughly 81% since 2000 with a consistent average appreciation each year.
Referencing FHFA's report, Gerald states, "Average appreciation in Iowa we're seeing around 3-4%. With lake properties, 18-20% is pretty normal... Depending on the exact location, we're seeing even bigger jumps than that."
Vacation homes are "a great place to park your money and you get to enjoy it."
A Few Things to Consider
Home maintenance and repair are inevitable, second home or not. A vacation home needs just as much attention as your primary residence and may, at some point or another, need a larger repair such as a new stove or A/C unit.
Your second home may be part of an association as well, which can add additional cost to your investment. However, many associations include exterior maintenance or even cleaning services, depending on your vacation home investment and location, and may be well worth the cost.
If the financial investment is a bit worrisome, consider utilizing vacation rental sites to make money on your investment. Sites such as Airbnb, Vrbo, and even Hotels.com offer vacation homeowners the added benefit of making cash on the side when your home isn't in use.
"On all of those sites, you can register your house for free. They would love to get more inventory."
While you can register your rental for free, there are fees when guests book. These fees do vary depending on how much you charge for rent and by company.
Opportunities for owning a vacation home are available in almost all communities around the nation- even globally. Most likely, anywhere you would regularly vacation, you would be able to find an investment property, including condos, houses, and even timeshares.
Gerald and the other Twin Power agents love getting together with both current and potential property investors to overview the numbers. Several of our agents are investment property owners themselves and have a great handle on what it takes for a house or condo to yield a high return on investment. Get in touch with us to run the numbers and discuss your vacation rental future!
All in all, owning your own slice of paradise sounds absolutely amazing and a great way to invest in your financial future. "Stay on vacation the rest of your life if you want to" by owning your vacation home and say goodbye to the days of cheap hotel rentals in the 'not what you expected' areas of town.
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Watch Gerald's Vacation Home Video and be sure to subscribe to learn even more and received video updates from the Twin Power Team!
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