Boost ROI on Vacation Homes

In a recent HousingWire article, several real estate agents and financial advisors chimed in on how to give the return on investment (ROI) for your vacation home a shot in the arm. Here is a list of tips from their combined thinking:

1. Understand how the new tax law affects ROI on vacation homes.
   1. The 2017 Tax Law indicates vacation home owners can deduct expenses, mortgage interest and property taxes on those homes if the owners limit their personal use of the home to 14 days/year or 10% of the time the home was rented, whichever is greater, according to Molly Ward, an advisor to AXA Equitable Advisors in Houston.
   2. Owners using a pass through entity (LLC, LLP, Sole proprietorship) are eligible to deduct an amount equal to 20% of the net rental income earned as a trade or as a business.
2. Donate the use of the home to a charity auction.
   1. Both the bidder and the owner can take a charitable deduction for that donation on any amount that is greater than “the personal benefit made,” said Ward.
   2. If the home sells in auction for $7,500/week but the market value is $5,000/week, the deduction is $2,500.
3. Donate the property itself to charity.
   1. If the owner doesn’t want to keep the house and wants to simultaneously lower her/his tax bill, donate the house to charity and deduct its fair market value. A qualified appraiser, in this case, defines fair market value.
   2. Ward said, “If the property is donated, the owner would eliminate capital gains on the property (if there is any) and would get full fair market value depreciation.”
4. Rent out the vacation house to an organization.
5. “Share” the vacation house with friends/family.
   1. Invite friends/family to share the costs of the vacation house by offering them a piece of the investment or rent it to them at a daily rate or for the cost of some of the expenses, said Fritz Miller, a senior partner with Signature Estate and Investment Advisors in Pasadena CA.
6. Use the vacation house for business.
   1. If you own a business and the business owns the property, offer the house as a reward/retreat for clients and/or employees.
   2. There are tax implications here…the owner of the business or the employer is limited to a cost per employee of $1,600/year, according to Ward.
7. Furnish the house for high-end renters.
   1. Use a color scheme of grey, white, black and gold.
8. Check in with local/regional film commissions.
   1. Connect with film locator scouts to get your house on the list of homes used by film companies.
   2. Production companies pay top dollar for each day of filming at/in your vacation home.