THE BIG PICTURE
INVESTING STRATEGIES
On Second Thought WHICH ONE MAKES THE MOST FINANCIAL SENSE FOR YOUR SECOND HOME: VACATION OR LONG-TERM RENTAL?
by Kevin Ortner
econd homes are increasing in popu- larity, with more and more Ameri- cans looking to buy vacation property. According to the National Association of Realtors, vacation-home sales account- ed for 21 percent of all transactions in 2014, their highest market share since the survey was first conducted. Since 1989, the number of vacation homes has risen roughly 25 percent, to 5.1 million. For those who are planning to use the property for at least a few months out of the year, buying a second home may make sense. But maybe, after making your pur- chase you realized that you weren’t able to return to the vacation property as often as you had hoped. Or maybe you found the expenses were more than you’d estimated S
them to be. To help recoup some of the costs, you might be thinking of renting out the property as a vacation rental. But there may be a better option: turning the property into rental hous- ing. You can rent out your property for cash flow each month, using it to generate income while your tenants pay the mortgage for you.
contend with. Standard rentals also have fewer empty periods than holiday homes that often sit empty in between bookings. It’s difficult to depend upon consistent occupancy with vacation homes, and there’s a good chance that some months, you could end up paying the mortgage and other expenses out of pocket. Then there’s the fact that vacation rentals are high maintenance. There has to be someone there to clean in between bookings, to greet guests and to provide information to them while they’re there. Often, management expenses for vacation properties are much higher than for standard rental properties. In some espe- cially sought-after locations, the cost for a property manager can be as much as 30
THEADVANTAGES OF RENTALHOUSING
Rental housing offers a number of ad- vantages over vacation rentals. While va- cation rentals usually have a high season and a low season, with long-term rentals, there are no such seasonal fluctuations to
40 | think realty magazine | may :: june 2016
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