Why vacation homes are a surprisingly good investment during a bear market


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For many people, a bear market means a downturn in investments and retirement funds. But there are several ways to make money during this time of flux, including investing in real estate—in particular, a vacation home.

See: Fed raises rates 75 basis points amid bear market and record high inflation
Looking to Diversify in a Bear Market? Consider these 6 alternative investments

Although the Fed raised interest rates by 75 basis points in June as a measure to help fight inflation, surprisingly, the housing market remains at an all-time high for buyers driving demand. And not just for primary residences – vacation homes are also on the rise. In the era of the Airbnb boom, many have used their savings to buy properties and turn them into rentals that provide a stream of passive income.

In fact, according to Entrepreneurs, 72.5% of rental properties in the US are owned by individual investors.

Vancouver mortgage expert Alan Harder added some context, telling Entrepreneur that “the key here is to make sure you choose a vacation rental that has an established market and rental demand, so that it’s profitable for both you and any potential. tenants – that way, no one loses.”

According to a report from Realtor.com, at the end of 2021, the average annual take-home pay from vacation rentals was $56,000 — the highest it’s ever been. The report also noted that there is a surplus of vacation rental listings of over 1.2 million.

Even better, according to Roofstock, if you own a vacation rental, you can get the same tax benefits that real estate investors get through deductions and write-offs as long as you’ve rented the property for 14 days or more .

Buying vacation rental property has become such a phenomenon that there is a Netflix reality series, “The World’s Most Amazing Vacation Rentals,” which explores the best spots around the globe for private accommodations. And now there’s even a new app called Here that’s “democratizing the process” so that ordinary Americans can participate in vacation property investing as much as those with disposable income.

Here it allows people to take shares in individual properties for an amount of $100, and after all the shares are spoken, the listing is then placed on portals like Airbnb where they are rented out. According to the app’s about page, shareholders then receive quarterly distributions of net rental income (rent minus fees, expenses and additional reserve distributions). All operational responsibilities are addressed here.

Before you invest, there are some guidelines that will help determine where the hottest markets are. Beyond looking at demand and seasonality trends, it’s about location, location, location. There are some failed ideas – invest in urban spots for business travelers and tourist locations if you’re going after the leisure market, of course.

For even finer details, Vacasa has released its fifth annual “Top 25 Places to Buy a Vacation Home” report. The vacation rental management platform bases its results on overall ROI, taking into account average home sales figures and annual gross rental income. And when it comes to their top picks, waterfront properties reign supreme. Vacasa notes that interest in short-term beach rentals increased by 10% from 2021.

Lake Anna, Virginia topped Vacasa’s list, with a 17-mile-long lake and beaches that are attractive to visitors, reaching $80,000 in annual rental income. Port Aransas, Texas is number two with an ideal location near the Gulf of Mexico and median home sales under $300,000. Three Florida cities also ranked in the top six, including Palm Coast, Okaloosa Island and Fort Lauderdale. The only major city to make the top 10 was Phoenix, where 300 days of sunshine and a “thriving tech scene” boosted its desirability.

See: Why buying property in these vacation destinations can be a great investment
Find out: 7 Cheap Island Vacations to Take This Summer

Once you’ve decided on a property, there are also some top banking tips for your investment, as GOBankingRates previously reported. Among them: Making all necessary repairs, spending on visible upgrades like the latest appliances and a fresh coat of paint, offering self-check-in for renters, and offering extras to guests like a bottle of wine or gift cards for local attractions.

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