Vacation Homes: From a Dream to a $35,000 Income Stream
(ARA) – For those who’ve ever dreamed of buying a vacation home in the mountains, on the beach, or in the big city, it’s becoming easier and more common for people to make that dream a reality.
In fact, Americans bought more than half a million vacation homes last year, according to the National Association of Realtors (NAR). Low mortgage rates, median sale prices that were down more than 15 percent, and the potential for generating substantial rental revenue are among the reasons many have made their dreams of a second home come true.
While baby boomers have historically led vacation home purchases, nearly half of the buyers in 2009 were under the age of 45, and the median household income of vacation home buyers was $87,500 – down from $99,100 just two years ago.
“An increasing number of younger buyers are getting into the market, seeing a vacation home as a long-term investment and a source for ongoing personal enjoyment and memories,” says Tom Kelly, author of “How a Second Home Can Be Your Best Investment.”
Kelly points to the NAR Investment and Home Buyers Survey that found vacation home owners plan to own their homes for an average of 16 years, up from 12 years in 2008 and 10 years in 2007.
Offsetting the cost of vacation home ownership
More people are able to afford a vacation home due in large part to the potential revenue stream that comes with renting the home to travelers – something that’s become especially easy thanks to the rapid growth of the online vacation rental industry in the past few years.
HomeAway, Inc., which operates online vacation rental sites HomeAway.com, VRBO.com and VacationRentals.com, has grown dramatically since it was founded in 2005. The company now boasts more than 540,000 vacation home listings.
“Our goal is to make it as easy as possible for vacation home owners to advertise their properties and manage their bookings online,” says Brian Sharples, founder and chief executive officer of HomeAway. “We literally deliver millions of rental inquiries each year to our owners who list their homes for rent on our sites.”
Those inquiries can lead to substantial revenue. Sharples says the average second home owner rents out their property to travelers about 20 weeks a year, generating more than $35,000 in rental income annually.
“The rental income that our home owners generate can help cover a typical second home mortgage as well as basic home maintenance and repairs,” he adds.
Tips for generating rental income from a vacation home
For those in the market to buy a vacation home, Kelly offers the following tips for where to buy, what to consider and how to maximize rental income.
1. Carefully review the destinations where you enjoy vacationing, and before you buy, consider the areas where consumer demand for vacation rentals is high.
2. Talk to an accountant about the tax advantages of owning and renting out a second home.
3. When you’re ready to rent out the property, be sure to market the availability of the vacation rental to travelers by advertising it on sites like HomeAway.com or VRBO.com.
4. Check out other similar vacation rentals in the area to determine what rates they’re charging, and price your home competitively.