In 2020, sales of vacation homes in the US increased by 16%. And by April 2021, the numbers had already increased by 33% from the previous year.

There’s no doubt that the pandemic is the cause behind this real estate boom. Thanks to remote work and having to stay inside more, people want more than one home base.

But is a vacation home a good investment? Are you risking a lot of capital for a small pay-off? Read this guide to consider the potential upsides and pitfalls.

Pro: You Have an Extra Source of Income

You won’t be living in your vacation home investment all the time. When you aren’t there, you could (and should) turn it into a vacation rental home.

List the property on sites like Airbnb and VRBO so that vacationers can stay in your home for a fee. If you don’t want to manage the bookings and clean the property yourself, you can hire a management company like TurnKey to do that for you.

Con: Not All Vacation Homes Are Profitable

But is a vacation home a good investment in every situation? Not always. Field of Dreams might’ve said, “if you build it, they will come” but that is not the case for vacation home investment.

Even if you don’t rent out your vacation home, the value might depreciate. And if you do list your property on rental sites, the location and type of home you have might not appeal to renters.

The best vacation home investments are in vacation hotspots on the beach, in the mountains, or close to famous landmarks.

Pro: There Are Lots of Tax Incentives

If you’re deciding vacation home vs investment property and the former wins, there are a lot of benefits. By renting your vacation home for more than 14 days of the year, it becomes a business, and that’s a good thing.

It means you can write off repairs, log home maintenance, hosting fees, cleaning costs, supplies, insurance, and mortgage interest. You’d have to pay mortgage interest and insurance anyway, so these incentives take the edge off.

Con: They Can Be Expensive To Set Up

Setting up a vacation home rental is a bit different from setting up any other investment property. The decor needs to be immaculate and easy to clean. Plus, it needs to have top-of-the-line appliances and amenities.

You also need a good supply of consumables like toilet paper and dish soap on hand. Renters often expect a booklet about the local area, free toiletries, and other extras. Most of these tasks might be things you were going to do anyway, but it’s a lot of expense upfront.

So, Is a Vacation Home a Good Investment?

The answer to the question, “is a vacation home a good investment?” is that it depends. If you choose a location, type of home, and decor that both you and renters like, it could be a great investment. And as long as you have financial stability and the desire for a second home, it might be worth giving it a shot.

If you’re considering buying a vacation home as an investment, you must love real estate! Browse our website for tons of advice, news, and tips all relating to the real estate market.