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Are Vacation Homes Better Investments Than Rental Properties?

March 05, 2012

Not all investments that you make in your investing career give you multiple ways to earn money like real estate. Buying investment property has always been one of the easiest ways to get started growing investments. There are advantages to owning a vacation property compared to a rental property although each earns a steady amount of income. When an opportunity presents itself, knowing how to react can give you a competitive edge over other investors that do not know if vacation homes are better investments than rental properties. 

Advantages of Buying Vacation Homes

People from all walks of life appreciate the ability to stay in a nice home instead of a hotel or resort. Vacation homes have always been one of the popular choices when arriving in Florida for tourism, business or seasonal living. The ability to rent to multiple tenants is a big advantage to owning a vacation home. Renting to a diverse group of people usually helps spread the word about a vacation home and the booking requests often increase. Since vacation homes can be rented daily, weekly, monthly or annually rental income is strong.

There are some tax advantages to owning vacation homes. Renting out a home for less than 15 days each year does not require the reporting of earned income. Depending on the location of a vacation home, it could be reserved for rent during the peak times of the year and build a considerable amount of profit in as little as 15 days. This type of return is lucrative in Florida due to the state tax breaks.

Advantages of Buying Rental Properties

Many tenants that search for available properties to rent request long-term lease agreements. Unlike a vacation home, a rental property lease can be for one year or longer depending on the credit worthiness of a renter. This extended time period guarantees a monthly cash flow that can be used to invest in other properties or investments. Many renters end up staying in a property for many years if the relationship blossoms between landlord and tenant.

Property management companies usually give discounts to owners of rental properties due to the long-term leases that are prevalent. This creates an easy way to manage a rental property without having to spend time as an owner completing inspections, paperwork, disputes or other matters. The tax advantages of buying rental properties are many since the home is used as a primary residence for a tenant. Many of the utilities, repairs and other expenses of managing a property can be deducted from annual rental income. 

Building Continuous Income with Real Estate Investments

It is important to know that regardless of the investment property that you choose you will earn rental income. The affordable listings for distressed properties that have been converted into livable homes continue to grow. Buying real estate investment properties ensures that your investment increases each year through appreciation and earned income. Taking real estate investing at a comfortable pace will help you learn and develop your investing strategies to benefit your portfolio of investments.

By Gregg Cohen

I am a co-founder at JWB Real Estate Capital, and I love to talk about investing in rental properties! You’ll often find me here contributing to our blog and in our Facebook group connecting with the community & sharing insights.

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