Written By: Kathleen Cheng
5 Tips for Business-Oriented Retirees Looking for a Vacation Home
Many retirees want to invest in a vacation home. In fact, the business is booming and expected to grow over the next decade, especially since vacation homes aren’t just places where families can congregate. They can be used as a source of income. Mid Tn Outdoors shares some tips for the business-savvy retiree looking to invest.
1. Start a Rental Business
Converting your vacation home into a rental property could supply you with passive income. You could rent it out during your off-season months or make it function similarly to an Airbnb. Run your operations as a legitimate business to establish credibility and consider starting your business as an LLC to protect your personal assets, such as your first home. If you want to start an LLC, you can hire a lawyer or a formation service to form your business for you, but formation services are less expensive.
2. Choose the Right Location
The property should have appeal no matter what season it is. For you, your vacation home should have all the amenities you need when you want a vacation. However, if you want to also use it as a rental property, you need to know what renters look for. For example, in the summer months, many people want easy access to the beach, lake, or a pool, and in the winter months, they may want to ski. Additionally, make sure you live close enough to the property if you want to manage it yourself. This would include handling maintenance requests on top of all the other landlord responsibilities.
3. Budget Ahead of Time
The first major expense is the mortgage itself. Check local listings for average market values in the area of your choice. However, when budgeting, you can’t just consider the cost of the mortgage. There are plenty of business expenses to look out for, like management, maintenance, marketing, business permits, and landlord insurance. Some of those expenses may even be deductible, so factor those into your calculations so that you really know what you can afford. Vacation rental agencies might be a good resource for estimating how often you’d be able to rent out your property, giving you an idea of how much you could expect to make.
4. Watch Out for Properties Sold “As Is”
“As is” is a real estate term used to indicate that a seller will not be making repairs on a property prior to selling it. This could mean that the home has major issues, so before you buy the house, conduct a thorough inspection, paying close attention to common problem areas such as the foundation, the plumbing, and pest infestations. You should also take a look at the land records for anything suspicious. If in doubt, consult a lawyer or set up a contingency to protect yourself.
5. Know the Tax Laws
The property taxes for your vacation home are likely going to be different than where you currently live. Plus, If you end up using your vacation home as a rental property, you’ll have to pay income taxes on any rent you collect. How you manage your rental will determine your vacation home’s tax basis for depreciation, and staying on top of the law will ensure you don’t get into legal trouble down the road.
To make the most of your vacation home, turn it into a business endeavor when you’re not using it. This way, you’re making the most of passive income. Choosing the right location, forming an LLC, budgeting accordingly, and keeping abreast of the laws and regulations will set you up for success.
Mid Tn Outdoors 