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The Smart Way to Invest in a Vacation Home

12/1/21

As international travel slowly reopens up in the wake of COVID-19, friends, families, and individual travelers are once again beginning to plan their adventures. With these renewed prospects for travel comes a resurgent market interest for investing in vacation real estate, particularly among luxury buyers.

As international travel slowly reopens up in the wake of COVID-19, friends, families, and individual travelers are once again beginning to plan their adventures. With these renewed prospects for travel comes a resurgent market interest for investing in vacation real estate, particularly among luxury buyers.
 
This guide is intended to help you decide if this option is right for you. Below are some recommendations for the most enjoyable—and profitable—ways to invest in a vacation home.
 

The Pros of Owning a Vacation Home


Whether you prefer the beach or mountains, there’s nothing more rejuvenating than escaping the daily grind and heading to your favorite place. If you’re hoping to purchase a second home near a destination you revisit annually—you’re not alone. In fact, the number of homebuyers who locked in mortgage rates for second homes has skyrocketed over the past two years, to a record 128% year over year in March.
 
This comes as a result of the highly-paid digital workforce intending to spend more time in their secondary residences. For these luxury buyers, a vacation home can deliver a huge quality-of-life benefit, and a way to build home equity in two places at once. It allows you to invest in a second-place to work, vacation, or retire. In a nutshell, it’s a home away from home that comes with a myriad of lifestyle benefits.
 
If the location where you’d like to purchase a second home is popular among tourists and other vacationers, the first benefit is the potential for additional income. You may be able to use your home to earn money through vacation renting—even after paying the cleaner or property manager their cut of the earnings.
 
Another benefit comes in the form of tax breaks. After all, who doesn’t love a tax deduction? If you decide to use the vacation house as a true second home and not a vacation rental property, the mortgage interest and property taxes are tax-deductible (but not if your second home is rented by other people for more than two weeks out of the year.)
 
Lastly, vacation homes offer an ideal spot for gatherings with your friends and loved ones. They make getaways easier since a second home eliminates the need to pack every possible convenience along with you in your car or suitcase.
 


The Cons of Owning a Vacation Home


For all the prospective benefits of owning a vacation home, it’s also worth diving into the cons.
 
One example is the cost associated with buying a secondary property. According to Redfin, secondary homes are soaring in popularity. A report by the company revealed that demand for vacation properties has quadrupled, helping push prices to unprecedented heights. If you opt for financing your purchase, you'll find that second home mortgage interest rates are going to be higher by at least half a percentage point, which can certainly add up over the years.
 
Another challenging aspect of owning a vacation home is the maintenance. If you live nearby, you can choose to get your hands dirty and tackle some maintenance and renovation projects yourself. But if you—like most vacation homeowners—live more than a few hours away from your second home, the maintenance becomes understandably more complex.
 
Legal issues are another headache that can accompany owning a vacation home. This is often the result of renting the property out, dealing with vacation rental agencies or HOAs, and the potential liabilities of being a host. Legal issues can also arise when purchasing a second home in a nation where you don’t have citizenship.
 
It can be tricky to figure out whether the benefits outweigh the potential headaches. But for those still set on the idea of owning a secondary home, there’s a tool that can help you avoid the stress of vacation renting altogether: Pacaso.
 

Consider Co-ownership


Pacaso is property co-ownership made easy, and an ultra-modern way to purchase equity in a second home. Pacaso allows luxury buyers to own shares of a vacation or second home, starting at one-eighth of the home’s total value. The company does the gritty work in terms of managing the home between owners, and you get to experience all the perks of owning the home while you’re in the space. Pacaso has modernized and simplified the idea of DIY co-ownership, making it the perfect way for you to find your second home.

Pacaso’s Three-step Process


Start by browsing the collection of beautiful, single-family homes in renowned vacation destinations. If you’re unsure of where to look, Pacaso’s team will be eager to help you find the perfect fit. They are also readily equipped to help you determine how many shares you’d like to buy. Once you’ve fallen in love with your dream vacation home, you’re almost there. The next step is owning it. Pacaso creates the LLC for each home, finds and vets co-owners, and handles all the sales details. At closing, the co-owners enjoy 100% ownership of the homes (Pacaso doesn’t retain any shares). And of course, the last step is to enjoy. Pacaso takes care of furnishings, repairs, utilities, and property management, which enables you to simply show up and relax. Scheduling is easy and can be done directly through the Pacaso app.
 

Pacaso Explained


If you’re feeling skeptical, take a step back and dive into some common questions people have regarding the model. If the concept of co-ownership is new to you, there’s a good chance you have a lot of questions. When it comes to investing in a vacation home, it’s definitely worth considering.

Do you actually own the home?


Yes. It’s true real estate ownership. This is accomplished when buyers purchase a share in a property-specific LLC. The home is specifically managed and designed for co-ownership.
 

What services are provided for Pacaso second homeowners?


As mentioned above, Pacaso provides an abundance of services for purchasing and maintaining real estate. It also includes everything from vacation rental property management to aggregating and managing monthly owner expenses and taxes, to overseeing the LLC and resolving legal disputes. Pacaso provides dedicated homeowner support, 365 days per year. Their top-notch customer service will make sure all of your needs are addressed and questions are answered.

How do you schedule a time to enjoy your house?


Booking can be done by using the Pacaso app, powered by the SmartStay scheduling system. This user-friendly app is simple to navigate and equitable for owners, based on the number of shares you own. The system supports two different types of stays: general and short-notice. General stays are considered ones that are scheduled eight days to 24 months in advance. Additionally, each owner has access to general stays that fall on a special date, such as federal holidays and popular local events. Short-notice stays, on the other hand, are booked two to seven days in advance. The maximum length of a stay is based on shares owned. Owners of one share can enjoy a stay of anywhere from two to fourteen nights. This number increases with the more shares one owns.

Why Pacaso?


 
Still on the fence about going with Pacaso or diving into the world of co-ownership? Although this concept can seem intimidating, it allows you to enjoy the best parts of owning a vacation home, while Pacaso does all the maintenance and legal work for you.
 
All you have to do is buy at least one-eighth worth of a property’s total equity, book your getaway, and show up for an unforgettable vacation. Get to know Pacaso and their home buying process in greater detail by visiting their website. And if you’re interested in learning more about Bay Area real estate, don’t hesitate to contact Kalena Masching today.

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Kalena utilizes the latest technology and market research to make your home buying experience smoother than you could imagine. Most importantly, she listens to what you need and wants in your new home and new neighborhood, making sure that you get the perfect fit.

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