Want to Buy a Vacation Rental Property but Already Own Other Homes?

Do you want to get on the action surrounding vacation rentals? If you own other additional homes, there are some special considerations that you'll have to keep in mind when planning to buy a vacation rental property. While you’ll need to know the ins and outs, buying a vacation rental property can be a great opportunity to make extra income and cover the expenses on your second home.

Being a homeowner is a crowning achievement in American life, so first of all, give yourself a pat on the back for being one. For those of you who have more than one home, you’re in a unique position to profit from buying a vacation rental property.

Before you get all fired up about adding another expense to your plate, consider this. Renting out a property as a vacation home can help you pay on your existing homes and give you extra income while you’re at it. Buying a vacation rental property can be a huge investment, but has some pretty nice perks such as receiving a great rate or high returns, building your wealth, and enjoying tax advantages.

Other benefits include:

• Cash tax deductions
• Mortgage interest
• Property taxes
• Operating expense
• Insurance
• Depreciation

One major advantage of buying a vacation rental home when you already have other properties is that it will diversify your portfolio. By diversifying your investment portfolio, you will have lower risks and more opportunity to make money. For example, when your stocks are performing poorly, that extra income from your vacation rental can help offset your losses and make them more bearable.

Conversely, when your stocks are doing well you can use that renal income to re-invest and keep building your portfolio over time. 

No matter the market's situation, there will always be some sort of value on your property and having insurance will protect that. One of the great advantages of real-estate is that it is a tangible asset. That same tangibility gives it a long-term value that can withstand market fluctuations. Your vacation home can also provide you with more stable returns than the stock market.

Another thing to keep in mind is that despite the ups and downs of the real-estate market, in the long run, property values go up over time. If you stay on top of the upkeep, you can rent out your vacation home for several years for a steady income stream and then sell it at peak value for a lump-sum profit.

The longer you have your property, the lower this risk will be of losing it. Along with that, the longer you hold on, the more money you'll make. When the market goes up, so will the value of your property, and you'll end up building equity.

Not all vacation rentals are for business, and to be rented out, they can also be used for your personal vacations. You can save yourself some money renting the home out to others when you aren't there, and enjoy it at your leisure whenever you want.

There are significant tax benefits to renting out a vacation home, especially if you do so as an LLC, or limited liability company. When thinking about buying a vacation home to rent out, you’ll want to form an LLC to protect yourself and your personal assets.

Think of an LLC as an umbrella, one that protects you from nasty things like tenants threatening to sue or causing property damage to neighboring homes. With the protection of an LLC over your head, you won’t be personally liable for any unpleasantness that comes up when renting to tenants.

Another reason to operate your rental property investments as an LLC is that if anything goes wrong financially, liability will fall upon the company. The company’s funds will be lost rather than your own as no real-estate investment is worth risking all of your own assets.

Now that you know about how beneficial buying a vacation rental home can be, you’re ready for the next step—finding the financing. If you have the extra cash lying around, you might be tempted to buy the property outright without taking out a loan. Resist that urge and keep your money where it belongs—in your pocket. While having no loan payment sounds dreamy, you’ll have a rude awakening when you see how much higher your taxes will be.

Opt for a 30-year fixed rate loan and you’ll have lower payments than a 15-year loan while still receiving the tax benefits in deductions. Between the tax write-offs and your rental income, you’ll be in a good position to have more money to cover expenses on your other homes.

Investing in a vacation home is like investing in a motel, they are long term and no less than 5 years. You can even pass it down to your children, depending on how you want your investments handled.

When looking for capital to fund your next rental property acquisition, seek out Vacation Rental Property Loans. Partnering with a financier you can trust is critical to the success of your rental property venture. With a credit score near 600, you can get the money you need tobuy a vacation rental propertyand start collecting the extra income.

Don’t hesitate to call Vacation Rental Property Loans and ask about our lending options today!