Why vacation homes are a surprisingly good investment during a bear market

Courtneyk/Getty Images

For many, a bear market means lower investments and retirement funds. But there are ways to make money during this time of flux, including investing in real estate, especially a vacation home.

See: Fed hikes rates 75 basis points amid bear market and record inflation
Looking to diversify in a bear market? Consider These 6 Alternative Investments

Although the Fed raised interest rates by 75 basis points in June to help fight inflation, surprisingly the housing market remains at an all-time high for buyers who are boosting demand. And not just for primary residences, vacation homes are also on the rise. In the age of the Airbnb explosion, many have used their savings to buy properties and turn them into rentals that provide a passive income stream.

Indeed, according to Entrepreneur, 72.5% of rental properties in the United States are owned by individual investors.

Vancouver mortgage expert Alan Harder added some context, telling Entrepreneur that “the key here is to make sure you choose a vacation rental property that has an established market and rental demand so that it is profitable for you and all potential. tenants – that way nobody loses.

According to a report by Realtor.com, at the end of 2021, the average annual vacation rental take home pay was $56,000 – the highest ever. The report also notes that there is a surplus of vacation rental listings beyond 1.2 million.

Even better, according to Roofstock, if you own a vacation rental, you can get the same tax advantages real estate investors enjoy through deductions and depreciation as long as you’ve rented the property for 14 days or more.

Buying vacation rental property has become such a phenomenon that there’s a Netflix reality series, “The World’s Most Amazing Vacation Rentals,” which explores the best places in the world for vacation rentals. private. And now there’s even a new app called here it’s “democratizing the process” so that average Americans can participate in investing in vacation properties just as much as those with disposable income.

Here, people can subscribe for shares on individual properties for as little as $100, and once all the shares are cast, the listing is then placed on portals like Airbnb where they are rented out. According to the app’s About page, shareholders then receive quarterly distributions of pro-rated net rental income (rent less fees, expenses, and additional reserve allowances). Here handles all operational responsibilities.

Before investing, there are a few guidelines that will help you determine where the hottest markets are. Beyond keeping tabs on demand trends and seasonality, it comes down to location, location, location. There are sure-fire ideas – invest in urban locations for business travelers and tourist locations if you’re targeting the leisure market, of course.

For even finer detail, Vacasa has released its fifth annual “Top 25 Places To Buy A Vacation Home.” The vacation rental management platform bases its results on overall return on investment, taking into account median home sales figures and annual gross rental income. And when it comes to their top picks, waterfront properties reign supreme. Vacasa notes that interest in short-term rentals on the beach has increased by 10% since 2021.

Lake Anna, Va., tops Vacasa’s list, with a 17-mile-long lake and beaches that draw visitors topping $80,000 in annual rental revenue. Port Aransas, Texas is number two with a great location near the Gulf of Mexico and median sales for homes under $300,000. Three Florida cities also made the top six, including Palm Coast, Okaloosa Island and Fort Lauderdale. The only major city to make the top 10 was Phoenix, where 300 days of sunshine and a “thriving tech scene” boosted its desirability.

See: Why Buying Property In These Vacation Destinations Could Be A Great Investment
To find: 7 Cheap Island Vacations to Take This Summer

Once you have settled on a property, there are also some key tips for betting on your investment, such as GOBankingTariffs Previously reported. Among them: making any necessary repairs, spending on visible upgrades like the latest appliances and a new paint job, offering self-check-in for tenants, and offering guest extras like a bottle of wine or gift cards for guests. local attractions.

More from GOBankingRates

Comments are closed.