Many people consider purchasing vacation home rentals but cannot find a way to make it work financially. In reality, if you do it right, a vacation home rental can actually pay for itself. Here are the basics of how to make a home rental pay for itself.
Determine the Break-even Point
Before you can do anything, you need to determine your break-even point with this venture. You need to figure out how many weeks out of the year you need to rent the property in order to compensate its expenses. Calculate how much this house is costing you on an annual basis. Take that number and divide it by the amount of rent that you charge for one week in the house. This number will tell you how many weeks that you will need to keep the property rented in order for the property to pay for itself. Unless you determine this number, you will not have a goal to work towards.
When you own a vacation home, you could potentially benefit from a huge tax break. If you meet the requirements, you will be able to deduct the amount of money that you pay in mortgage interest from your taxable income at the end of the year. Many people are familiar with this deduction when it comes to their primary residence, but they do not realize that they can also take it with a vacation property. In order to qualify for this deduction, you will have to use the property personally in addition to renting it. According to the IRS, you have to stay in the house for more than 14 days out of the year or for 10 percent of the time that the property is rented. Whichever time period is greater, this is the amount of time that you are required to stay in the property.
Many people use outdated methods to advertise their vacation properties. In today's world, you need to focus on Internet advertising to bring people to your property. There are a number of different ways that you can advertise effectively online. You can start your own website that features information about the property. You can drive traffic to this website by using methods such as pay per click marketing, e-mail marketing, or through social networking sites. Many of these methods are inexpensive or even free, and they can be very effective.
Cutting out Management
Another way that you can make your vacation rental pay for itself is to cut out management fees. Many people that own vacation rentals hire a management company to do everything for them. The management company will clean the property, conduct necessary repairs, and collect rent money for the owner. They will also make sure that the property is rented for the owner. However, if you can conduct some of these tasks on your own, you could potentially save quite a bit of money over the course of the year.