Second homes: The buy-and-rent strategy

Would an extra $17,500 a year in income influence your decision to purchase a second home?

Let’s say you have come to the conclusion that there is absolutely no way you could afford a second home at this time in your life. Now, step back and put yourself in renter’s shoes. Would you rent this place, say for $250 a night, which is the cost of the cheapest hotel in the area? OK, that’s $1,750 a week. And, you genuinely believe you know enough people who would rent this home for at least 10 total weeks this year?

You are not the Lone Ranger. Buyers often need renters to help offset their costs particularly in the first few years of ownership. Not only can renters help you get in the door now, but they can also provide steady income for you down the road – perhaps to travel in retirement.

Second home owners often overestimate the time they can realistically use their property. Academic calendars, family reunions, can’t-miss business trips and basketball tournaments often get in the way of the only time you can everyone together at the beach or lake.

It’s important to remember that it is also easier to rent out your place than you think. Friends from work, church, park leagues will be interested in spending their leisure time in your retreat. That’s because they know you – and many will probably enjoy the same environment and experiences that you enjoy. There’s also a nearly unlimited pool of friends you have yet to meet who would like to take their family on vacation to a getaway that has your home’s amenities.

Remember, you don’t have to consider your second home exclusively for personal use. That’s the view most second-home buyers initially take, but times are changing because of the public’s quest for a variety of experiences.

You don’t have to be “tied down” to a second home and feel like it’s the only place you can spend your time. You would be surprised at the number of people who would welcome the chance to rent it while you are elsewhere in the world.