Can You Really Pay for a Vacation House By Renting It Out?

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The idea of owning a vacation home seems pretty far-fetched to most people. While some of us have been on a vacation, and perhaps we have even rented a vacation home, owning such a property sounds a little outrageous. Vacation homes are often extremely expensive because they are located in ideal tourist areas; think near the beach.

However, for some travelers who like to go to the same vacation spot each year — or even several times a year — owning a vacation home might be an ideal venture. HGTV’s show Vacation House for Free has introduced the idea of owning a vacation home for free to many people. The idea is that if buyers are willing to rent out their vacation home during the peak season, they may earn enough income to live in the home for free during the rest of the year or during visits. But is this really possible?

Your ability to purchase a vacation home that can pay for itself depends on several factors. According to Zillow, operating expenses can be very expensive — often, these costs are 60 to 70 percent of revenue. These costs include communicating with interested parties, marketing and advertising, building a website, replacing items when they “disappear,” drafting leases, processing rent agreements, paying bills, paying for maintenance and cleaning, and more. So although you may be able to rent out your vacation home and make enough money in a few weeks to pay for your yearly mortgage, you also need to factor in all these additional costs.

You also have to think about the cost of insurance, as well as property taxes, in addition to your mortgage and operating costs. You also will need to personally deal with issues that renters have if you don’t employ a property manager, which might be difficult if you live far away — not to mention, employing a property manager is another cost. In the case that your house has a serious issue and you have to miss out on rent for a while, these costs can really add up. Also, if you experience an off-year and you don’t rent out your vacation home as much as you expect, you will have to figure out how you are going to pay for the bills that would have been covered by the rental income.

While it’s true that vacation houses are often very expensive because of their desirability, you don’t always have to pay top dollar. There are ways to purchase a good vacation home without spending a ridiculous amount of money. Where you want to buy will make a difference, but within a certain vacation area there will always be some houses that cost less. If you are willing to renovate a house, that can save you a lot of money. Also, although many renters want to be on the beach, you may be able to purchase a home away from the beach for much less. You then can focus on details that most renters really want besides the beach, such as space for many guests, and a great kitchen.

Because you might want to use the vacation home yourself, you need to figure out how many weeks per year you will use it and how much rent that will take from the amount you need to cover your mortgage and other expenses. If you want to stay in your vacation home for several peak weeks, you may not be able to pay for that home by renting it out. You also cannot expect to get top dollar during less popular parts of the year, and you have to assume that you will not have your vacation home rented out 100 percent of the time that you hope to.

According to VacationHomeRentals.com, there are several things you should consider if you want to make a profitable vacation rental purchase. Think about your motivation: Are you hoping to make an investment, or do you have a long-term goal like retirement? Do you want to have an investment but also use it yourself? You also need to think about taxes and financing, look seriously at the rental market in the area where you are considering purchasing a vacation home, and consider many other issues.

So can you really pay for a vacation house by renting it out? The answer depends on various factors, but even if the answer is yes, it won’t be easy. If you have a long-term goal of retiring to a specific place and you can find a great deal on a vacation home now, then you may want to consider it. If you regularly visit a particular spot and you have enough extra income so that you will stay afloat during seasons or years during which you don’t make as much money as you want, than you also might want to consider purchasing a vacation home. However, as wonderful as owning a vacation home might be, it won’t always be easy or affordable.

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