If you own a second home or a vacation home and find yourself not occupying it that often, you might be considering alternative options for the house rather than letting it sit empty. It would be best if you made an informed decision on whether to sell your vacation home or rent it out by gathering as much information as possible about the two different scenarios. There are pros and cons to renting out your vacation home or selling it, and each is analyzed below:
Selling Your Vacation Home
Deciding to sell your vacation home or second home is not a decision to be made lightly. If the house has been in the family for many generations, it is in a prime location, or you were able to score a good deal on it many years ago, you may feel an emotional attachment to the property that will be hard to break. On the contrary, in a hot market, selling your vacation home can be particularly tempting as you might be able to make a considerable return on the sale.
If you do ultimately decide to sell your vacation home, your first step in the process would be to contact a qualified real estate professional. A real estate salesperson will be able to assess the value of your property based on comparable sales of similar properties in the nearby area. From there, they will assist you with writing the real estate listing to put your home on the market, coordinating showings, and eventually receiving an offer for the property. They will continue to assist you through the inspecting, qualifying, and closing processes.
There is another route you can take when deciding to sell your vacation home. If you are knowledgeable in real estate transactions and want to save some money on commission fees, consider selling your vacation home as a FSBO (For Sale By Owner)listing. The for sale by owneroption removes the seller’s agent (and sometimes the buyer’s agent) from the equation, saving you some money. Be sure to enlist the help of a real estate attorney to review the contract upon sale.
PROS TO SELLING YOUR VACATION HOME
- You might receive a substantial amount of money from the sale – Depending on how much of your mortgage has been paid and the pace of the current real estate market, selling your vacation home might send a large sum of money directly into your account. Keep in mind. However, you will lose a portion to taxes and maybe even capital gains, depending on how long you have owned the property.
- You can say goodbye to upkeep and property taxes – You will no longer have to worry about maintenance and upkeep at your vacation home, which might be a relief to free up your time or your budget. You will also no longer have to pay property taxes on the additional property, which can add up alongside your primary residence.
CONS TO SELLING YOUR VACATION HOME
- You no longer have your getaway home – If you are looking for a weekend getaway or a week-long retreat, you will now have to find a rental online and book it far in advance. Once you sell your vacation home, you will no longer have your place to escape to at your convenience and will have to start being a little more intentional with your trip planning.
- You are missing out on potential rental income – If your vacation home is in a desirable area, like vacation homes near California beach, it is possible to rent it out and make some extra money through rental income. Renting would require dedicated efforts and possibly hiring a property management service but could pay off in the long run with additional revenue for your savings or retirement.
Renting Out Your Vacation Home – Property Management
If selling your vacation home is just not an option for you, but you are not occupying it as often as you would like, think about renting out the property. If your vacation home is in a great location, like vacation rental destinations in California, you will have no issue finding renters and bringing in that desired rental income.
Renting out your vacation home will require a few steps to get everything set up. First, you will want to depersonalize your home for renters. Remove family photos and heirlooms to make the place comfortable for all. You will also need to list your rental property on an online hosting service. Hosting services can either be a local rental platform or an option like Airbnb or VRBO. Take a look at comparable vacation rentals to your home to decide how much you will make the nightly rate for your place. It might be a good idea to consult a local real estate agent for this task.
If you plan to rent out your vacation or second home, you should consider hiring a property management team to lift some of the rental burdens from your shoulders. A property management service will, at the very least, complete needed repairs and provide preventative maintenance to your vacation home. Additionally, property management companies can also handle the rental bookings and turnover process between renters to make your involvement relatively minimal.
PROS TO RENTING OUT YOUR VACATION HOME
- You could be bringing in a substantial rental income – If your vacation home is consistently rented throughout the year, you might be looking at a good chunk of rental income in your pocket. However, keep in mind that this additional income is not all profit. You must subtract income tax, property tax, management fees, upkeep costs, and vacancy fees from the total income received.
- Your rental business will be relatively carefree with a property management service – If you opt to hire a property management service for your vacation rental, your involvement in the day-to-day operations will be little to none. Your property management team will take care of all the renter’s needs and only consult you to approve significant repairs or changes to the operations.
CONS TO RENTING OUT YOUR VACATION HOME
- You will have to schedule your vacations around your renters – You will no longer be able to show up at your vacation home whenever you please. Therefore, it would be a good idea for you to block off certain weeks throughout the year for you to use your vacation home before the renter books those dates personally.
- You will have other people inside your home and using your stuff – For some people, this is the dealbreaker when considering renting out their home. You will have strangers using your furniture and linens, which might not be ideal for some homeowners. Make sure you consider this factor before renting out your vacation home to someone else.
Which is the best option for you?
Even after weighing the pros and cons of selling or renting out your vacation home, it can be challenging to make the final decision. It will ultimately come down to your personal preference and the level of risk and responsibility you are willing to settle with.
Consider this final analysis of the two options to decide which will work best for your situation:
|PROFIT||Immediate profit upon sale depending on mortgage balance and state of real estate market||No immediate profit, however potential for greater long-term profit|
|MANAGEMENT||Maintenance, upkeep, and tax burden are immediately lifted upon sale of home||Property will need to be managed as long as it is being rented out, responsibility can decrease with a property management service|
|RISK||Short-term risk of real estate market conditions||Long-term risk of keeping the home rented out/maintained and of real estate market conditions once you do sell the property|
|DECISION||Once your home is sold, you cannot reverse your decision||If you decide to rent out your vacation home, Nothing is stopping you from selling the house in the future|
Owning a vacation home is a great way to diversify your assets and give yourself more options in your day-to-day life. If you want to keep your vacation home for the long run, consider renting it out to bring in additional income for you, your family, and your long-term goals. If you have a vacation home and no longer serve you, it is a great idea to sell it and remove some of that responsibility from your life.