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Is a Vacation Property a Good Investment?

Marina Bay in Quincy MA

Is a Vacation Property a Good Investment Tool

 Vacation properties! It can serve as a good investment tool. It can help you to save an ample amount of money if you use it a lot. It can be a perfect place for your stay during your vacations if the hotel and lodging costs are high in the destination you frequently visit.

One thing that needs to be kept in mind, is that the cost of owning a vacation home is higher as compared to a primary house, in terms of upkeep and insurance. Hence, to reduce the cost, you need to do some research and should do a vacation rental investment analysis in an area that has a reasonable price tag. Planning to get vacation rentals? You can get in touch with Real Property Management Associates to avail their services related to property management Braintree.

Before you rush to invest in a vacation home, you need to consider the following things that will turn your vacation property into a good investment tool:

Cash Reserves and Cash Flow Projection

 Qualifying for a vacation home mortgage needs disposable cash and a complete knowledge of its rental potential if you are going to rent it out. If mortgaging the property as an investment, then you will qualify by using rental income. The interest rate, in this case, will be higher than a primary home purchase.

Rental income should be calculated including expenses such as homeowners’ association fees, mortgage payments, state taxes, local taxes, vacancy rates, maintenance, cleaning, landscaping, and capital expenditures. You can get help from vacation property managers to get an accurate picture of potential cash flow.

Occupancy Rate

 Whenever someone is investing in a vacation rental property, the purpose is to get a good return on investment in a short season. If keeping the property rented (yearly rentals) at a high occupancy rate is your objective for better income, then buy a property in a place that doesn’t depend on seasonal renting.

In case you live far from the property, hire a competent property manager to get high occupancy rates and happy tenants . A professional manager is the key to turning your property into a good investment and experience. If you are looking to get services related to leasing and managing your vacation property, then you can contact property management associates to get the desired help from professionals.

Get Adequate Insurance

 It is an important thing to ensure that your vacation getaway is adequately protected. You need to select the right insurance policy that can protect your house in event of catastrophic loss. Make sure the insurance company knows that you will be renting out the property to others.

Furthermore, you need to see how the location of your property affects your insurance premiums that include eroding beaches, crime, or hurricane damage. If the property is kept vacant, then you may face insurance coverage restrictions, because a property is more likely to fall into disrepair. To know about the best places to buy a vacation rental property, it is recommended to gather some knowledge about the area before investment.

These are some of the things that need to be considered to make your vacation property a right investment. Will the property act as a source of long-term profits, a retirement income, the second property for your personal use and more. Your vacation property may also help you in tax deductions. Talk to your tax consultant for up to date information.

Income Tax Considerations

The Internal Revenue Service (IRS) has very specific rules for vacation properties. The property can be classified as a vacation home or an investment property depending on the number of days that you, as a property owner, occupy it for personal use.

If you use the property for personal use for more than 14 days or more than 10% of the number of days it is rented out, then it will be considered as a vacation property. If the property is rented out for a period of more than 14 days, it is considered an investment property.

If the property falls in the vacation home category, then you can deduct mortgage interest and real estate taxes on your income tax return like your primary residence. Other expenses, including insurance, repairs, maintenance, and condo fees will not be deductible.

In case of investment property classification you will be able to deduct all expenses connected with the property, at least up to the amount of rental income received from it.

You need to determine if having a vacation property is a right investment tool. Looking to manage your property? You can get Cape Cod property management service to manage your residential, commercial or vacation property through experience property managers.

For more information about the Real Property Management Associates service, you can call us at (508) 509-4485.

 

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