As airfares continue to rise, vacations continue to get more and more expensive. Once you add up the costs of transportation, paying for a space that accommodates your family comfortably, and all of the meals out, your vacation tab can be significantly higher than you budgeted for. Purchasing a vacation home might actually save your family money each year when you consider tax incentives and potential rental income should you choose the rent the home when you're not there.
Does it Make Sense to Buy a Vacation Home?
Everyone's situation is different, but for my husband and I the decision to buy a second home, to use as a vacation home, was one of the best decisions we ever made. Here's why:
A truly comfortable budget. In the good old days, we schlepped young kids hither and yon, crammed into hotel rooms that weren't as "suite" as originally anticipated, and stared at each other with blood-shot eyes over miscellaneous restaurant tables as our kids drove us crazy. Then we wised up and started renting houses and condos. We loved that! They were more affordable in the long-run, we could rent the same ones year after year so they truly felt like home, and one grocery shopping trip meant we didn't have to eat out unless we really wanted to. Heaven!
Extra Income. After a decade of renting the same home on our visits to Sonoma County, we finally woke up and said, "why the heck are we pouring money into someone else's investment when we could be creating our own?". We immediately went house hunting with a local real estate agent. Within three months were were the proud owners of a second home, had a "free" place to stay on our annual summer vacation, and had it listed with a local vacation property management firm. The first check made payable to us came just a little while later. And then, there are the tax incentives.
Tax Incentives. It's a good idea to check in with your CPA to determine it/how you want to structure your second home as a vacation rental for tax purposes. All we can say is that when we add up mortgage interest and property tax deductions, maintenance costs ("losses") and our overall rental income, we are completely satisfied. Not to mention the absolute delight of having a home that is "ours" and truly is a home away from home when we're on our favorite vacation. Keep in mind that your maintenance costs can require diligent paperwork skills but we have managed to spend time in the home as "fix-up" days (never to be called "vacation days") and still have a good deal of time left over to enjoy Sonoma County Wine country...
Keep in mind that your tax bracket may change whether or not you want to purchase a second home. Tax legislation will be changing for real estate investors. Fortunately for us, our second home has been a wonderful addition to our life and we have never looked back.