Many holiday-seekers today prefer to stay in vacation rentals instead of hotels because of the many benefits rentals provide. As a result, the demand for vacation rentals has increased considerably, including in Wilmington, Wrightsville Beach, Carolina Beach, and the other coastal communities in southeast North Carolina that are frequently visited by tourists.
Investing in a rental can be quite profitable, but it’s not for everyone. If you’re thinking about adding a vacation rental to your portfolio, it’s best to first look into the advantages and disadvantages of such an investment.
You earn rental income
The number one benefit of owning a vacation rental is the regular passive income it brings, part of which you can use to pay for the property’s mortgage and maintenance expenses. Depending on the season and your property’s location, the rental income can offset your expenses and bring in a nice profit, as well.
When looking for a vacation rental investment, check out the homes with great access to the area’s attractions and amenities. If the area is popular among vacationers, you’ll have better assurance of constant bookings.
Your property’s value increases
Over time, the value of your vacation rental will likely appreciate, especially if you keep it well-maintained and updated. Property values in highly desirable locations tend to increase significantly, while those in less favorable areas may stay flat.
You enjoy tax benefits
Owning and operating a vacation rental entitle you to tax write-offs for certain expenses, such as repairs, operating costs, property tax, and mortgage interest. Just make sure that you report all your rental income on your tax return and keep receipts of your expenses.
You can use it from time to time
One of the best things about owning a vacation rental is that you can also use it personally, particularly during the off-season. You just need to make sure you don’t exceed the maximum number of days you can personally use the property before it can be classified as a residence.
Buying and managing a vacation rental involve significant costs
In addition to the down payment and monthly mortgage amortizations, you also need to spend on the home’s utilities, repairs, and maintenance, even when your rental is not occupied. If you hire a professional manager, you need to factor in their fees, as well. Other costs that come with owning a vacation rental include property taxes and insurance fees.
You need to manage the property
Managing your vacation rental can be a challenge, especially if your primary home is a good distance away. That’s why most vacation rental owners hire a caretaker or a management company to keep watch over their property and its operations even in their absence.
Renters are seasonal
Most people in our area usually rent vacation homes during the summer holidays or long weekends. This means during the winter, when you’ll have more frequent vacancies. You need to come up with a good financial scheme to offset any lost income during these lean periods.
Tenants are a hit or miss
Part of owning a vacation rental is dealing with different people, and ensuring they pay on time and keep your house in good condition. The best way to avoid a less-than-ideal tenant is to screen them, by interviewing them on the phone, checking their social media accounts, or meeting them in person.
If you want to learn more about the benefits and downsides of owning a vacation rental, or if you’re looking for the perfect investment property in Wilmington, Wrightsville Beach, Carolina Beach, or the surrounding areas, Thirty4 North Properties Group can help. Call them at 910.821.3510 or email kfreeman(at)thirty4north(dotted)com.