You're not alone if you're longing for familiar surroundings. The National Association of Home Builders predicts that by 2020, 7.15 million Americans will own a second home. On the other hand, they are widespread and may be found in practically every state. Think about the commitment involved before you join the group. We'll go through half a dozen practical concerns of having a vacation property, from taxes to renting it out.

Top 6 Things to Think About Before Buying a Vacation Home

The complete monetary effect

Owning a second property means taking on double the financial burden. If you have a problem with your main house's sewer pipes and then your secondary home's HVAC system breaks down not long after, you'll get hit with not one but two hefty bills. On top of the unexpected costs, however, there are the increased normal costs:

• Repayment of a second mortgage
• Utilities
• Upkeep
• HOA costs
• Expenses incurred in travelling to the residence
• Rental management fees

Financing Alternatives

Even though you're still paying for your primary house, you've found another wonderful place you'd want to visit during the summer. You'll have to get funding if you want to pull this off.

Judith Corprew, explains that, like with any loan, the bank will assess whether or not your income is sufficient to pay your charges. Expect to have your credit checked, income, job, assets, and debts scrutinized.

Being Able To Go To Other Places

One might apply the adage "familiarity breeds contempt" to vacation houses. After ten years on Clearwater Beach, Florida, the allure of the warm Gulf waters may have been eroded by the hassle.

Similarly, the allure of a 10-hour trip through picturesque countryside to a remote mountain chalet might dwindle into a dreary trudge after a time. Buyers should evaluate how much time and money they'll spend at their second house vs elsewhere.

Buying a property in a destination where you and your family spend a lot of time vacationing makes financial sense.

Renting Out Your Second House

Renting out your vacation home is a great way to generate income and help cover the costs of owning one. However, read the relevant statutes to be sure of your legal standing before making a purchase. Remember that what is legal in one state, city, or neighbourhood may not be in another.

In New York City, for instance, Airbnb is against the law unless the permanent resident is present or the rental period exceeds thirty days. Condominium purchasers should research whether or not the association's rules permit short-term rentals, such as through Airbnb. In some neighbourhoods, tenants must get the OK from the homeowners' association before renting for less than 90 days.

Taxes On A Vacation Home

Regarding taxation, a vacation house can be treated as a primary residence or an investment property. If you only rent your home for 14 days or less each year, it is still considered a primary residence.

Regardless of how you categorize your rental income, the law requires you to disclose it. The primary distinction is that you can't deduct mortgage interest payments if your second house is used for rental purposes.

If your expenses exceed your revenue, you may be eligible to take a loss on your rental property. Schedule E of Form 1040 is where you should disclose these expenses. You should see a tax expert if you have questions regarding your tax obligations or deductions.

Long-Term Investment Possibilities

Real estate values are not guaranteed, as anyone who lived through the housing crisis of 2007-2009 will attest. Residential real estate may increase in value, but contrary to popular belief, it is not the best investment. A second house may not be the ideal place to put money in the long run, making it a poor investment choice for people saving for retirement or other long-term goals.

Reasons to Get A Vacation House

The financial benefits of owning a second house are only one of the numerous advantages of having a second property. A second house may be a source of passive income, especially in popular tourist areas, thanks to the proliferation of home-sharing and rental sites like Airbnb and VRBO.

But, a second property is a great way to diversify your assets beyond the traditional stock market, bonds, and 401(k) plan. Real estate does increase in value over time, so a second house purchased to hold onto it and eventually passing it on to heirs might be a wise investment.