Does anyone rent their apartment/condo in their city and own a second home in another state? I’m looking at 5+ bed lakefront vacation homes in a rural area in a different state that are a fraction of the price of a shoebox condo in the city I work in.
With today’s WFH culture, I think vacation homes provide more utility than ever. I like the flexibility and cost effectiveness of renting in my city (hot real estate market, high property taxes and insane HOA fees that are often 50%+ of the mortgage payment itself) and think buying a secondary home in a cheaper and more rural area that I can eventually transition into a primary residence would provide more value.
I’m curious if anyone has done or heard of doing this and what, if any, the tax implications and special financing options are. Seems like most mortgage programs like FHA loans are for primary residences, even if the secondary residence is your first home purchase and you don’t own any other real estate. Are there any loan programs I could take advantage of that don’t require me to spend 51% of my time at the secondary home (I’m confirmed to A2A so, despite a flexible WFH culture, it’ll be a long time before I can be away from the office that long [if ever])?
Thanks
One of my buddies rents in NYC and just bought a vacation home on the coast of Valencia in Spain (he is Spanish) that he has turned over to a local AirBnb Company. Cost him about 600k (5bed/4bath a v nice pool/backyard, close to the city but far enough) and he will probably spend a week or two there a year while essentially getting it for free. But massive administrative pains to get it through.
Do you know how this looks tax wise / profitability / able to run a airbnb (w/ company) while from a diff country?
Have not dug into the taxes/finances with him specifically. He is a US Citizen so unfortunately, I would imagine that means he will get the double taxation from both Spain and the US. The earnings itself from the AirBnb are pretty solid. The management company handles everything and takes about 10-15% of booking revenue and from what he told me on the comps in the area (this is a pretty popular beach town near Valencia that the locals/Spainards like going to), he can easily airbnb this for 800-900 a night or more and will easily get booked up during the typical European vacation season.
Will also add that he obviously has family in the area who can help out/have use for the home so they will also help with the upkeep.
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I have little to no interest in ever being a landlord of any kind. There's just too many variables with having a dumbass living in something that you own. It's nothing but a headache waiting to happen.
Yes, yes, I know people will say that there's management companies to do that for you, blah, blah, blah. But those companies don't do it out of the goodness of their hearts, right? The fees they charge along with the autonomy you lose for repairs and the like are just not worth it to me. If you can get to some significant scale then maybe it can fly. But I have yet to meet a friend/colleague who is doing this - in the way you describe - without losing too much money (and they all lose money, it's all about managing losses, you're never winning with this).
The only successful independent landlords that I have met are completely out of residential and are near exclusively commercial.
Yes I did this in early 2021, I purchased a condo in South Florida while renting in NYC. A work colleague of mine has a similar situation which actually inspired me to do the same as I viewed the market as favorable for investment too. It was actually my first "home" purchase, but because it was still considered an investment/secondary residence, I had to put 25% down. So I think it's pretty unlikely you will be able to take advantage of any loan programs. I was able to spend about half of 2021 and most of 2022 there. But I think a lot of people get this idea that they will be able to rent their property throughout the year while they are not there, and it's a lot complicated and difficult than you expect. It's better you view it as negative carry against any capital gains on the property if you plan on using it yourself.
Thank you! Agree that it really isn't realistic to expect to rent the place out regularly. I'd have it for myself and let family use it whenever they like. Any rent would just be an added bonus to ease the burden, but I wouldn’t buy a place I couldn’t afford without rental income.
Yes exactly. I let my parents use it whenever and then some close friends. I actually ended up transitioning it to my "primary residence" due to some changing circumstances in my life as I move around. It is nice to have a place where you keep your things permanently.
I rent my primary residence and have a vacation home out west in the Rockies, generally split my time between each place. I definitely don't rent it out though, I don't want some random jags in my home. Always having a place to get away and relax is definitely worth it but really only something you should do if you have the financial wherewithal to sustain that lifestyle without having to rent it out.
Yeah 100% agree with this sentiment. You can't buy a secondary residence with the idea you are going to rent it out for part of the year. That was the same recommendation I got when I was in the process of buying, you have to be able to comfortably afford the second housing cost. You are not going to want random people at your home with your possessions. Not to mention, the times that you will easily be able to rent your place short term, will be the same times that you will want to be there.
Looked into doing this myself. Actually ended up buying a two-acre parcel of land in southern Vermont (pretty close to the ski resorts but only about 3.5 hours from NYC) for about $50,000. Had saved up another $300,000 to build a modest cabin on the lot to rent out and use in my limited free time, but unfortunately construction costs have run completely away from reality, and no contractors in that area are willing to build anything under ~$400-$500k. Existing home values have also become absurdly inflated, so might have to put this dream on hold. Debating whether or not to sell the land or hold onto it for a few more years until things start to hopefully come back down to earth, but its a tough bet to make.
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