How Vacation Homes Pay Back their Expenses

Since the last decade purchasing a vacation home has been as common as buying a second car, especially for the residents of West Europe and of the U.S.A. It’s not rare for them to buy a second house somewhere close to their main residence or even far away from it. Of course, this is not a coincidence since purchasing a vacation home has been one of the most profitable investments referring to the Real Estate sector for the last ten years.

The reason for this is that by investing on a vacation home not only do you save money from vacations but also you can use it as a permanent source of income. Buying a second home may demand an important amount of money but at the same time it can easily pay back not only these money but also its own expenses of maintenance or taxes. In this article you will find out how this is possible.

Suppose that you purchase a cottage on the lakeside or a cabin in the mountains or even a villa on an island, unless you enjoy your retirement or you are not professionally bound, you will be able to spend not much more than two months in it.

This means that for the rest of the year the house will be standing empty and that’s exactly what gives you the opportunity to use it as a source of income as you can rent it. Especially, in case you have purchased your property by using a loan or a mortgage then renting it is the easiest way for you to pay them off.

An example:
Suppose that you purchase a villa on the Island of Lefkada in Greece by using a mortgage. In this case, you can rent your villa for 5 months per year and pay off your mortgage. At the end of 5 years, you have paid off your investment with your villa earning upwards from 30,000 euro per year to 50,000 euro per year. In five years you have paid off for the land and the building through renting while you can enjoy your villa for half the year each year. In addition, you are left with a beautiful villa near the sea, at an island with immense beauty which has not been discovered yet. In numbers this means that if you pay for your private villa say 300,000 euro, in 5 years you can get a significantly better price for it in the range of 500,000 to 700,000 euro. Plus, you pay the mortgage with the revenues from the rent.

Furthermore, you can use the amounts that you spend for the maintenance of the house in order to save from your property or income taxes and this is mostly important in case that your income is high or in case that you have obtained your second home by an all – cash purchase.

What you should take into consideration

Renting your vacation home is not a totally simple procedure and in case that you cannot afford hiring an agent to find the tenants and to take care of all the demanded arrangements, then there are some important facts that you should pay attention to. First of all, you should ensure that your second home either it is a villa or a cottage or else stands on a location where there is a constant and high demand for house rental. Secondly, you should consider according to your income for how long you should rent your property in order to avoid high income taxes and finally you should be very careful with the tenants you choose each time. You should ensure that they are eager both to be committed by a contract to their financial responsibilities and not to cause serious damages to your property.

In times of financial recession, purchasing a second home can be one of the most effective and profitable investments as by renting it you can either pay off your mortgage or loan or you can enjoy an extra source of income.

Cratus Estates
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