What You need to Know about Using a Vacation Home as a Rental

MARATHON, Fla. - July 12, 2015 - PRLog -- Per Brenda Alexander, Broker/Associate at Remax and owner of KeysIslandSales.com in Marathon Florida, "For most vacation home owners, the decision to purchase their properties come as a result of being financially comfortable. However, others buy a second home out of necessity--traveling back and forth from one locality to another. There are still others who like the idea of having a dedicated space to enjoy while away from their primary residence, and, put it to work as a rental property when out of town.

If you’re considering buying a vacation home, and are interested in using it as a rental, there are a few things you ought to know to make it worthwhile.

For tax filing purposes, the IRS divides a vacation rental into three categories: You rent your second home for most of the year, you rent in short increments to others, or, you rent it out but also use it yourself. So, let’s look at it from an investment standpoint. In this situation, you stay at your second home for 14 days or less each year. When this is the case, you can do the following:

●      Buy in a place that’s in a destination location. When you do decide to buy a vacation home, don’t dare neglect overlooking its location. While the rule of thumb for a primary home purchase is to buy into a good neighborhood, it expands with a second home to a destination location. This way, it’s easy to keep occupied, generating a constant revenue stream.

●      Build equity while earning an income. Though the income you earn--if you rent for more than two weeks per year--won’t be tax free, you will be building-up your net worth as the home gains more equity value. As the equity grows, you have more leverage for future rental property purchases.

●      Deduct expenses from your vacation rental. Because you are renting your second home and earning an income, that allows you to write-off many expenses, which include, but are not limited to: maintenance, mortgage interest, insurance, utilities, depreciation, taxes, advertising, management fees, and so on.