Having a vacation home is something many people dream about. Unfortunately some expenses come along with it. Things like HOA dues, utility bills, snow plowing, maintenance and property taxes can be additional expenses that will need to be paid. Your vacation home can generate income when you’re not using it that will help to cover those expenses. Here are some strategies to help accomplish that.
1. Rent your property short term. This is the most obvious and popular way to generate income with your vacation home. A general rule of thumb is to anticipate approximately $10,000 per bedroom gross rental income every year.
2. Handle your rentals yourself. If you are renting your condo through a full service property management company you can elect to do some/all of the work yourself and keep more of the profits. Even out of state owners can easily make this type of program work for them.
3. Tax deductions. As long as you stay below the limit, your mortgage interest is deductible. You can also deduct expenses if you are claiming rental income. Offering up a stay in your vacation home for a charity to auction off could be tax deductible too. We are not tax advisors so be sure and discuss how these strategies can work for you with your tax advisor.
4. Buy your vacation home with your IRA or retirement account. Some retirement accounts allow you to acquire property with the funds. That account will pay the bills and keep the income for that property. There are many rules to follow so set this up with your financial advisor prior to purchasing your vacation home.
5. Rent seasonally or long term instead of short term. There is a shortage of seasonal and long term rentals available in Summit County. You can easily find someone willing to rent your condo if you won’t be using it for three months or more. Long term rentals have lower management fees so could actually end up generating more income for you than short term rentals.
6. Trade for services. Everyone needs a vacation. If you can offer your contractor at home a free stay in your condo if he will paint it for you while he is here. Maybe your attorney, plumber or landscaper would enjoy a vacation in the Colorado mountains if they are willing to do some work you need done. Consider trading lodging for services whenever you can.
When buying a vacation home, don’t overextend yourself. Plan to pay all the expenses yourself. Use these strategies to cover your expenses when it’s feasible to do so and enjoy the extra savings.