Schedule E will bring some real numbers to the specific property. From there, one can assess the less tangible costs to generating the results seen and reduce the risk of a costly surprise. If a seller won’t do this, it should be a deal killer.
Our vacation home has been wonderful for our family. We don’t rent it and don’t need to rent it to afford it. We have used it a lot. If a client can afford a vacation home without renting and they truly contemplate some of the qualitative issues I have mentioned, I readily support the choice.
For clients that must rent to be able to afford the property or would have difficulty using the property a lot, the numbers rarely add up. I encourage clients to really think through the reasons why they think the property will be good for them. In many cases, they can come up with a way to address the underlying need in a less problematic way.
Dan Moisand, CFP, has been featured as one of America’s top independent financial advisors by Financial Advisor, Financial Planning, Investment Advisor, Investment News, Journal of Financial Planning, Accounting Today, Research, Wealth Manager, and Worth magazines. He practices in Melbourne, Fla. You can reach him at [email protected].