Can A Vacation Home Be Used As A Primary Residence
For property owners with 2+ homes, it is more than likely that one serves as a primary home and another as a real estate investment. Earning a rental income is one of the main reasons for buying a second home. Investing in a vacation home can be quite lucrative if chosen to rent it out, and it might even turn into a full-time passive income.
Technically, though, as soon as someone starts renting out a second home, it is now considered an investment property. Since this property is meant to make money, it can no longer be considered a primary residence or even a second home. Even so, theres very little question about whether or not a second home should be rented out if making some extra cash is on the agenda.
The only potential turn off other than the work involved is filing the yearly tax return. Property taxes for an investment property and even a second home are a completely different entity from residential property taxes. Not wanting to deal with mortgage insurance and tax implications is a major reason to keep the second home as-is, rather than use it to make rental income.
But what about calling a vacation home a primary residence, and is this even possible? Not only is it possible, but labeling a vacation property as a primary home might just be the smartest financial decision ever.
Primary Residence vs Second Home vs Investment Property
What is a Primary Residence?
What is a Second Home?
What is an Investment Property?
A Vacation Home as a Primary Residence
Create Your Airbnb Listing
Creating a listing on Airbnb is free. Although hosts get charged 3% of the booking subtotal in the U.S, while guests are charged up to 14.2%, depending on several factors. To list your home on Airbnb is pretty easy and you decide on house rules and what type of guests you want.
Create a listing which includes photos of your home, and the rooms guests would be staying in. Then craft a description of the home and the area in which it is located. Mention the amenities available and choose the dates you would like to make the house available for. Set your own price and house rules.
Note that youll be competing with other Airbnb properties in your neighborhood. So keep the average daily rate in mind when setting your price. You can, however, increase the price in certain situations usually when there is an influx of visitors into the neighborhood.
Pros Of Investing In An Airbnb Property
#1: Potentially Higher Profits
In the best Airbnb markets, the nightly rate of an Airbnb can lead to more profits than you would get with traditional renting. For example, in Kirtland, OH, where the Airbnb cash on cash return has been 10%, the average traditional rent is $1,380. This means you could make around $16,560 if your tenant signs a 12-month lease.
But short-term rentals usually charge more per night: according to Mashvisorâs analytics, the average daily rate for an Airbnb in Kirtland is $143, with units typically occupied for 70% of the year. This means you could make over $36,000 per year off of your Kirtland Airbnbâmore than two times the annual income of traditional renting in the area.
#2: Pricing Flexibility
Airbnb hosts have the opportunity to adjust their pricing as often as every day. You may lower your rate for longer stays or midweek bookings or charge more during peak seasons, weekends, or when there is a popular event in the area. This lets you try out different pricing strategies and find which one can maximize your income potential.
#3: No Lease Agreement
Unless you are subleasing your place on Airbnb, you do not need to ask your guest to sign a lease agreement. Airbnbâs terms and conditions as well as your house rules are often enough to protect you and your property. If a guest breaks your house rules or damage your property, you can reach out to Airbnb for support and mediation instead of suing your guests, which tends to drag for too long.
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Makah Street Center Island Wa 98221
This cabin on the lovely native surrounds of Center Island is begging to be transformed into an Airbnb. Oak ceiling and floors in the kitchen while the main living area and bedroom create a cozy and inviting retreat, and multi level decks that will blow your mind with a sauna and fire pit. Not to mention views like you’ve never seen before. See also the spacious shop along with ample storage for included crab pots, golf cart and Livingston dinghy.
Furniture is included so this one is totally turn key.
So. Much. Potential.
Should You Buy An Airbnb Investment Property
Since 2008, Airbnb has been an exciting innovator. Airbnb has changed how we vacation throughout the world, but its also created diversified opportunities to invest in real estate. With the online marketplace, property owners became able to rent out their spare rooms or entire homes, and now millions of people stay in an Airbnb on any given night.
Some real estate investors have entirely moved away from traditional leasing in favor of Airbnb, but there are risks, and its not right for everyone as with any investment.
While you can certainly rent out a home you already own, what if you want to buy a property for that specific purpose?
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What About Buying It As An Investment Property
Purchasing a home or condo specifically to generate rental income means that you’ll need to apply for an Investment Property mortgage. Again, this type of mortgage has differing requirements and qualifications. You’ll be able to access your best rates if you have at least 20% for down payment, good and steady income sources.
But here’s what you really need to know.If you plan on renting it out for short-term stays when you’re not there instead of having long-term tenants, you likely won’t be able to secure this type of mortgage. Generally speaking, mortgaging a property specifically for short term rentals will be difficult, if not impossible:
- Because lenders can’t properly assess or rely on the income for your qualification â which may vary seasonally or by location, be slow to start, or rely on strong user reviews or host-with-the-most marketing.
- And lenders see it as a risk to the property .
So then, for short term rentals, you would need a ‘commercial’ mortgage , which is more expensive, harder to qualify for, and comes with a lengthier approval process.
BUT, on the other hand, if you purchase an investment property to generate long-term rental income, you may be able to pay off your mortgage faster. In that case, you can work up to having the cash upfront to entirely buy a vacation home. At that point, the world is your ‘Airbnb’ oyster â meaning you can rent it out to your heart’s content without worrying about a lender’s disapproval.
Airbnb Investment Trends And Forecast For 2022
Before buying an Airbnb investment property, you must first look at the market and any external factors that may be impacting it.
For the third year in a row, the number one factor affecting Airbnbs is the COVID-19 pandemic. After struggling in 2020 due to lockdowns that prevented people from traveling, Airbnb rentals in certain markets have started recovering the following year. Airbnbs in rural and less-crowded areas, for example, saw a surge in bookings as travelers who were tired of staying home have started seeking out safe travel destinations.
Another trend we witnessed in 2021 was the increase in long-term stays on Airbnb in urban areas. According to Airbnbâs travel report, 62% of summer nights booked in New York were for long-term stays. Seattle and Los Angeles Airbnbs also had long-term bookings filling 40% and 43% of their calendars, respectively, throughout the summer. This is likely because of more people working remotely. Instead of working from home, they chose to do it elsewhere.
Unfortunately, in 2022, COVID-19 remains a fixture as the Omicron variant continues to impact travel plans. But despite record COVID cases in the US and massive flight cancellations over the holidays, Americansâ overall travel sentiment has improved from previous months. According to Destination Analysts, more people are open to traveling for conferences or conventions. Residents are also warming up to having tourists in their communities.
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Con: Higher Down Payment
The required down payment for a vacation rental property is notably higher than that required for a primary residence. You usually need to put at least 10% down on vacation rental properties but it can get up to 25% or even higher depending on the strength of your application. That is to say, you should be prepared to make a hefty investment upfront on just the down payment alone.
Next, youll have to invest in quality furniture and decor, repairs, marketing, etc. Start-up costs for an Airbnb business are significant but if you choose the property and location wisely, you may be in for a great return on investment.
Brook Rd Golden Co 80403
An hour outside of Denver you’ll find this charming three-bed cabin nestled in the hillside – perfect for an escape from the city and sure to draw crowds of short-term renters. With a few updates, this place could make a killing on Airbnb!
If you happen to just be starting out on your home buying journey or are moving cities or states, you may find our research resources helpful:
- Home Loans – Get Pre-Qualified in Under Three Minutes!
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How Do You Decide Where To Set The Price For An Airbnb Rental
Look up Airbnb rentals in your area and see how much they cost. They are your competition, so you want to price your rental accordingly. Compare features, size, and location to estimate how your price may differ from other rentals. Cleaning fees and other extra charges can be rolled into the rental price or charged separately.
Investment Properties For Sale With Huge Airbnb Potential
Airbnb is a popular way to make money, and for good reason.
People are always looking for ways to travel more affordably, and Airbnb offers exactly that by giving people the opportunity to rent out private homes for a more personalized, comfortable, and unique experience.
Before the pandemic, city central Airbnbs were in very high demand but 2020 brought an unprecedented wave of demand for more rural properties where people can break away from the hustle and bustle of their day-to-day lives.
We’ve curated a list of investment property opportunities in a variety of locations below for you to choose from – each one with a unique draw that is sure to catch the eye of any Airbnb vacationer.
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Plan How You’ll Handle Bookings And Guests
Managing an Airbnb is considered passive but there is some work involved. Also, youll be dealing with a lot of people. So if you have social phobia or discriminatory beliefs and dont want to share your space, you probably shouldnt manage short term rentals.
If you plan to manage up to three or more Airbnb rentals, you definitely need help. Here are some things youll need to set up to make your work easier:
Search For And Analyze Properties
Now you know which cities to search and what type of property to buy. But how would you know which house or apartment is profitable? If you think that just because Airbnbs in a city have high returns means every property in that area would generate a lot of rental income, you would be wrong. Different factors can affect an individual homeâs profitability.
Using Mashvisor to Analyze Airbnb Properties
So as you search for the perfect house to turn into an Airbnb rental, you would be more efficient if you use an online tool that allows you to analyze every listing. Mashvisorâs Property Finder tool displays properties for sale in up to five cities and sorts them by profitability. You can also filter your search by setting your budget and number of bedrooms and bathrooms and selecting your rental strategy and property type.
- Property description
- Selling price
- Investment property analysis
Under property valuation analysis, we estimate the rental income, expenses, cash flow, and returns if you buy this house and turn it into a traditional rental or Airbnb rental. This way, you can tell which rental strategy is optimal for the property.
In this section, you can see your accumulated earnings each year. This complete analysis will help you decide on whether the property you are looking at is worth investing in.
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Private Money Loans From Family And Friends
If youre looking for a private money loan, your best bet is to go through a friend or relative who can provide the funds. The good news is that there are no credit checks for these types of loans. Therefore, if you have people in your circle who might be interested in assisting you to fund the deal, then go for it.
The interest rate, time frame and down payment depends on the lender. But there is a bit more flexibility when it comes to these types of loans than with traditional banks.
Opt For Vacation Rental Software
In addition to outsourcing certain jobs like cleaning and maintenance to other companies, it is also a smart move to sign up for vacation rental software. A good vacation rental software will save you at least several hours per week. By automating as many of your daily tasks as possible, you can grow your business without necessarily having to take on more daily responsibilities.
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Buying An Airbnb Investment Property: The Only Checklist You Need
Purchasing an Airbnb investment property is not complicated at all. However, if you plan on being the owner of the best real estate investments, you need a plan! Luckily for you, we have prepared the only checklist you will ever need when planning on buying an investment property, such as an Airbnb investment property. So, are you ready to find out what steps the most successful Airbnb investors take when buying an investment property? Then simply keep on reading.
How To Buy Your First Airbnb
Airbnb-style investment properties have become exceedingly popular with real estate investors in recent years because of their flexibility, control, and income potential. In March of 2019, Airbnb hit the six million listings milestone. Traveler demand for Airbnb-style accommodations in popular destinations continues to push that number higher.
Isnt it time for you to claim your piece of the Airbnb pie? In this post, well show you how to buy your first Airbnb-style investment property. And how to make sure youre getting the best deal possible.
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How Can You Boost Your Airbnb Occupancy Rate
As an investor in vacation rentals, you must be wondering how you can push your occupancy up above the average Airbnb occupancy rate for your location in order to make more money. Here are some tips and tricks that will help you out in this regard:
1. Develop a comprehensive Airbnb pricing strategy
Pricing your Airbnb rental property right lies somewhere between science and magic. Getting the right rental price for your property is hard, but it is crucially important for your success. The first step is to investigate what other, similar short term rentals in the area charge where Mashvisors valuation analysis will be of indispensable help.
The next step is to evaluate the high and the low seasons in your location and to adjust your price accordingly. Dont forget to factor in weekends and weekdays as well. Most importantly, remain flexible. Once youve settled your nightly rate, if it prevents you from achieving a high occupancy rate, consider lowering it. After all, its better to rent out your property for a few dollars less than to keep it vacant. If, on the other hand, demand is strong at the current price, you can consider raising the rate a bit and see if this affects demand negatively.
2. Excel as an Airbnb host
3. Provide more extras
It Can Be Made Into A Passive Investment
Most people are discouraged from buying property for Airbnb when they imagine the amount of work that comes with it. However, even if you are a busy person, you can still invest in Airbnb. As the home-sharing industry grows, so does the number of property management companies for short-term rentals. After buying an investment property for Airbnb, you can hire a professional property management company to take care of the different aspects of the business. This includes marketing, dealing with guests, collecting payments, maintenance, and property cleaning and restocking between visits.
If you think that this is the right rental strategy for you, check out our guide on becoming an Airbnb host.
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