But is buying a vacation home right for you?<\/p>\n
With the rise of platforms like Airbnb and VRBO, it seems like everyone is a vacation rental owner or real estate investor. But just because you own a vacation home, that doesn\u2019t mean you have to turn it into a business. In fact, Darren Tackett<\/a>, a top Scottsdale<\/a>, Arizona agent who specializes in vacation homes, says that the vast majority of his clients don\u2019t use their vacation home as a short-term rental.<\/p>\n As of 2020, 5.11% of the total housing stock in the U.S. were second homes<\/a>. During the COVID-19 pandemic housing surge in 2020 and 2021, the number of people buying second homes rose as remote work became more common and people sought to get out of highly populated cities, as well as lock in low mortgage rates.<\/p>\n In January 2022, demand for second homes was up 87% over pre-pandemic level demand<\/a>. This is just shy of the 90% increase from pre-pandemic levels that we saw in September 2020 as many people bought second homes to get out of large cities and have more space while they were under stay-at-home orders. In June 2022, 5% of homes were purchased for vacation use<\/a>.<\/p>\n With current mortgage interest rates hovering around 5.6%<\/a>, the demand for a second home has cooled, but lower home prices and slightly higher inventory mean that a vacation home could be the right move for you. However, there\u2019s still a lot to consider.<\/p>\n\n\n\n\n\n Buying a vacation home can be a complicated process, but an expert buyer’s agent will be your homebuying MVP. Connect with a top agent using HomeLight today. We analyze over 27 million transactions and thousands of reviews to determine which agent is best for you based on your needs.<\/p>\n \n To help you weigh your options, we talked with Tackett to discuss the pros and cons of buying a vacation home and whether or not it\u2019s the right choice in the current market.<\/p>\n Believe it or not, the qualification of a second home depends on the definition set out by the IRS for tax purposes. In order for a vacation home to qualify as a second home, you must use it for at least 14 days each year<\/a> or 10% of the total days you rent it out to others, whichever is greater.<\/p>\n There is also a distinction between days you\u2019re there to maintain the property and days you\u2019re there to relax and enjoy the property, so understanding all facets of how and when you can use it as a vacation rental is important.<\/p>\n Mortgage interest rates for a second home are typically lower<\/a> than those for an investment property. This is something to factor into your upfront and long-term costs of owning a vacation home.<\/p>\n When you rent a short-term rental, you can\u2019t always predict what sort of neighborhood it will be in. If it\u2019s surrounded by other short-term rentals, you may inadvertently be caught in a party spot where other vacationers are blasting music and making a ruckus. If you buy a vacation home, you can vet the neighborhood and make sure it meets your criteria for the perfect vacation spot.<\/p>\n If you rent a hotel or short-term rental for your vacation, you risk going without some of your vacation essentials if your room or rental isn\u2019t properly equipped. In a short-term rental, you\u2019re using other people\u2019s things and sleeping in strange beds.<\/p>\n But if you own a vacation home, you\u2019ll be going \u201chome\u201d every time you arrive. You\u2019ll have control over the decor, the supplies, the furniture, and the amenities. You can even leave clothes and other necessities there that will lessen the packing load when it\u2019s time to visit.<\/p>\n Tacket recently rented out a vacation rental, but when he asked if he could rent it next year, he was told they won\u2019t be leasing it. \u201cSo now,\u201d he says, \u201cwe\u2019re back to hoping we can find something versus, if we had our own place, it\u2019s always our place and we can always come back to it.\u201d So whether you\u2019re headed to a cabin in the mountains, a beach house<\/a>, or a single-family home in a resort town, you\u2019ll always have a place to call your own.<\/p>\n The process of buying a home<\/a> will likely come with some stress, but Tackett says the best part about working with clients who are looking for a vacation home is that \u201cvacation homes are always fun\u2026I get to help them not only find a place but then I get to help them figure out what they\u2019re going to do when they get here. So there\u2019s not much more fun than that type of buyer.\u201d If you do decide to buy a vacation home, let yourself have some fun with the process and look forward to spending your vacation in your very own place!<\/p>\n The initial cost of purchasing a home<\/a>, mortgage closing costs, and property taxes are the obvious expenses you\u2019ll be responsible for when you purchase a vacation home, but it\u2019s important to consider these other costs as well:<\/p>\n The nice thing about staying in a vacation rental or hotel is that once you check out, you leave your responsibilities behind. If you own the home, you\u2019ll need to make sure it\u2019s maintained throughout the year. This could mean you visit regularly to make sure everything is functioning, or you can hire a property management company or an individual to check in periodically.<\/p>\n If you are purchasing a vacation home in an area with harsh winter conditions, there are extra steps you must take to prepare your home for vacancy<\/a> in winter months:<\/p>\n Keep in mind, however, that standard homeowners insurance policies might not cover damage<\/a> that occurs while the home is unoccupied for an extended period of time. Work with your insurance agent to craft a policy that will include coverage for the times of the year that the home will not be occupied.<\/p>\n Before you buy a vacation home, you should sit down and weigh the pros and cons, but there are a few other things to consider:<\/p>\n While you can deduct the mortgage interest on a second home, it only applies if you don\u2019t<\/i> use the home as a rental. You can also deduct property taxes on your second home in the same way you can for your primary residence, up to a $10,000 limit<\/a>.<\/p>\n If you rent your vacation home out for 14 days or less throughout the year, you don\u2019t have to report your income \u2014 though the rental platform (Airbnb, VRBO, etc) might have to report the income you made. If this occurs, the IRS could contact you, but all you would need to do is verify that you fall under the 14-day exception.<\/p>\n![\"homelight](\"https:\/\/www.homelight.com\/blog\/wp-content\/themes\/ccprototypev5\/images\/logo-small-cta.png\"){kind=logo}
\n <\/div>\n \n Thinking About Buying Your Perfect Vacation Home? A Top Agent Can Help <\/h3>\n
What qualifies as a second home?<\/h2>\n
Pros of owning a vacation home<\/h2>\n
Choice of neighborhood<\/h3>\n
You\u2019ll feel at home there<\/h3>\n
It\u2019s always available when you need it<\/h3>\n
It\u2019s fun!<\/h3>\n
Cons of owning a vacation home<\/h2>\n
You\u2019ll have all the expenses associated with owning a home<\/h3>\n
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You\u2019ll have to maintain it year-round<\/h3>\n
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Things to consider<\/h2>\n
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The tax implications of buying a vacation home<\/h2>\n
![\"Darren](\"https:\/\/media.homelight.com\/uploads\/agent\/picture\/2671592\/95d3e752-27d9-4ec9-b16e-07f03b4d2d85.jpeg?width=121\")
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