Having a vacation home in a different country comes with several financial benefits and is a great strategy for those who are looking to invest in their financial portfolios.
With any financial investment, it is important to set up the portfolio in a way that is diversified and can bring you future returns.
That my friends, is exactly what buying an international vacation home can do! Here are just a few financial benefits that I have come up with:
Diversify your portfolio – having your eggs in one basket is never a good idea when it comes to your investment portfolio and those considering real estate as a way to profit may think twice after reading this. Anyone who has kept up with the economics of America has noticed the housing market is not very stable. If you invest all of your extra capital into the domestic real estate and the market crashes, you will be scrabbling around to recover your money. However, buying a vacation home in another country means you are not subject to the same domestic market volatility and therefore not looking at the same lose.
Easy Money – Everyone wants to make easy money, and the idea of passive income is what keeps investors investing. When you buy a vacation home, there are a few options for getting a return on your investment. The most popular one is renting your home out when you are not there. You have heard of timeshares, in a sense, you could do the same thing. Find a management company to lease your vacation home out during off seasons for a way to earn some easy passive income.
Save money – The average American spends over $3K on a vacation per trip, this includes lodging, meals, and entertainment. Consider the amount of money you will save by owning a vacation home! You no longer have to worry about your favorite hotel getting booked up or spending money on out to eat expenses for every meal. With a vacation home you simply show up, and you have immediately transcended into vacation bliss in your home away from home!
These are just three financial benefits of owning an international vacation home, but there are some excellent tax benefits as well. Depending on the country, you may be able to deduct some or all of your mortgage interest on your vacation home.
Talk to your accountant and your investment banker for a full list of financial and tax benefits of owning a holiday home!
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As with any investment, buying a vacation home is something to be smart about. Many deciding factors should go into making the decision to buy a second home.
I have put together some helpful tips and things you need to know as you move towards buying your vacation home:
- Location IS Important – With the convenience of the internet you have the ability to search for homes for sale in almost every country. Making sure you pick the right vacation location is important. What are the reviews on the area the home is located? Have you been there and visited the country or town personally? These are all imperative questions and ones that you should not disregard. Knowing the amenities and the type of neighborhood can help you to make the right move. Even going as far as to visit the area during less peak times of the year to get a feel for the town when there are not so many tourists.
- Income potential – if you are looking to rent your vacation home while you are not there, make sure the home is located in an area that people want to visit. Is the home close to local tourist attractions and other amenities? These are all good things to investigate if you are looking for the passive rental income and not just the best for sale price. If the price is low high but not close to any amenities that vacationers may want to visit, then you might have a difficult time trying to rent your home out to help pay the mortgage.
- What are the costs? – Just like your primary residence, your vacation home comes with additional costs like maintenance, insurance, and mortgage interest. Depending on the bank and your personal creditworthiness, many secondary homes come with a heavier price tag. The last thing you want to do is bite off more than you can chew financially. If the bank deems your purchase as an investment property, you may be looking at a higher mortgage rate as well.
- Don’t make an emotion decision – before you consider the whole picture, you may be tempted just to look at the beauty and glam of the vacation home. Making an emotional buying decision may leave you with regrets later. That is why it is important to take your time and don’t feel pressured to commit to buying your vacation home. A lot of times in real estate, there is pressure because you are afraid the home will be sold fast. While that may be true, there are always more homes out there!
Buying a vacation home is a great investment and one that should not be made flippantly. Looking at all your options both geographically and financially will ensure you make the right decision!