When buying a vacation home, it’s important to weigh up all of the positive aspects and drawbacks of investing in any type of second property.
Despite the potential downsides of purchasing and running a vacation home - such as costs - there are plenty of pros of owning a second home, not least of which, the enduring childhood memories you will give your children. Not to mention the earnings you can make through renting the property out.
So are vacation homes worth it and are you missing out? Here are the key facts you need to consider.
- Renting Your Vacation Home
- Taxes: Writing Off Your Expenses
- Initial Costs
- Permanent Vacation Destination
- Same Old, Same Old
- A Comfortable Retirement
Renting Your Vacation Home
Many vacation homeowners maximize their investments by renting their homes out to people when they aren't using the property. This allows them to offset the costs of running the vacation home, and in some cases, even make a return.
Renting is an excellent way to get the most out of your vacation home. While for many it’s more than worthwhile financially, it can be time-consuming. A rental company or platform can oversee the rental of your vacation home for you in order to save both time and money.
You have plenty of options. For example, Airbnb is a popular choice for many. The host page is helpful and there's a potential for income. However, hosting via Airbnb isn't always so easy. Be sure to check on the legality of renting through a platform like Airbnb in your state or country and do your research before making a decision.
Then there are the hidden costs if you go down the Airbnb route to rent your vacation home. Do you have the time to spend maintaining your property? Are you aware of the fees involved? Have you looked over all the local laws? Or have you even thought about the amenities such as WiFi, entry systems - right down to extra towels? All these fixtures, fittings and services are for you to provide. All that Airbnb provides is the guest.
Another option is to look for a vacation home that is already fully-furnished and managed by some of the biggest hospitality names around, such as Hilton. With a rental option like this one, you can put your vacation home into a rental program where it's maintained to resort-quality standards.
So, not only do you not have to deal with managing the rental yourself, but you can also achieve a higher nightly room rate and better annual occupancy too.
Taxes: Writing Off Your Expenses
In some jurisdictions, if you’re renting your second property out for a certain number of days each year, it will be considered a business for tax reasons. While this does mean you’ll have to pay taxes on your earnings, you may be able to write off many of the expenses associated with the upkeep of the property for rent.
These are just some of the areas you might want to consider writing off for tax:
- Cleaning costs
- Property management and maintenance
- Mortgage interest
- Insurance premiums
- Utility costs
- Hosting fees by companies such as Airbnb, should you choose to use them
For tax information, make sure to research your local laws and regulations as it can differ between U.S. States and from country to country.
The initial cost of purchasing a vacation home is enough to make many would-be second homeowners rethink their plans to invest in another property, even if they plan to use it as a means of additional income through renting.
Aside from mortgages, the initial costs depend on the route you go down. Although the initial costs can be off-putting, the end result makes it worthwhile. You'll have a vacation home to use whenever and however you want.
If you wholly own the property, it should be increasing in value over time. Meanwhile, income from rental will be contributing towards annual property and running costs.
Permanent Vacation Destination
Flicking through holiday brochures, endlessly scrolling vacation websites, debating over which destination will be the best for a vacation - these are the common issues with vacation planning. With a vacation home, you vastly decrease the time, money and stress it takes millions of people to book and arrange a vacation.
With a second home away from home in a vacation location you already know and love, you can reduce:
- Time spent finding, comparing and booking accommodation.
- Money spent on accommodation and the potential cost of a travel agent.
- The stress of finding a villa or hotel that has the amenities you need in a location you like.
Same Old, Same Old
While every place will have hidden gems to discover or new activities to try year on year, some holidaymakers and vacation homeowners may find traveling to the same place for their vacations repetitive and quickly lose interest with the place they’ve chosen to invest in a second property after a few years.
Among the best ways to combat this is to find a vacation home somewhere you have been before and know that you already love. Try also to mingle with the local community and make friends and connections in the area.
Above all, to avoid this you need to know your own mind. If you’re an adventurous traveler who rarely likes to stay in one place for too long, then purchasing a vacation home may not suit your holiday preferences and lifestyle.
A Comfortable Retirement
If you are buying a vacation home, it will likely be in a place you love, so that each year you can spend precious time there as a family. Your family will grow to love your choice too, and as you grow older you may consider it a place to retire when the time comes.
By picking the perfect vacation home destination for you and your family, you can test firsthand what it might be like to retire in our chosen place. Use investing in a vacation home as an opportunity to plan for the future and make sure you enjoy your retirement adventure full-time in a place you enjoy.
Where Should You Buy a Vacation Home?
This totally depends on you, your needs and your lifestyle. It needs to be a place you'd enjoy having as a second home and somewhere you can imagine spending your time. If you're undecided and want to visit some countries before making a decision, then be sure to have Greece, Bermuda and the Caribbean on your list.
It also depends on the route you want to go down. If the idea of having a hospitality giant like Hilton manage your vacation home when you’re not around, then Bermuda should be at the top of your list. Here's a list of all the Hilton hotels in Bermuda and the Caribbean to narrow down your search.
Bermudiana Beach Resort is the latest addition to Hilton's Tapestry Collection. If it's an option you want to look into, why not check out our handy guide on what makes Bermudiana Beach so special?
Get your copy below to find out what this subtropical paradise has to offer you.