What’s the Difference between an Investment Property and a Second Home?

Being in a resort community, we hear these terms a lot: investment property and second home. However, we also sometimes hear them being misused or misrepresented. Often people use the terms interchangeably but really there are some big differences (especially when it comes to financing and/or taxes)

Both second homes (or third or fourth!) and investment properties are a great way to build wealth over time and develop your portfolio of assets. However, a second home is one where you will use the property personally quite a bit more than an investment property. While you may still rent out a second home for a few days or weeks a year, the primary use will be for your family. Therefore when purchasing a second home, you are going to look for a property type and configuration that serves your family over merely looking at the bottom line and rental numbers. The benefit of a second home may not come in rental income but instead in saved expenses from hotel or Airbnb costs or just memories made!

An investment property, on the other hand, is one that you purchase with the sole intention of generating income. An investment property could even be right next to your primary residence! When purchasing a primary residence, a buyer will look more at location, rentability, layout, etc rather than how it suits them personally. For example, properties in Elkhorn with lofts can make great investment properties as they allow you to rent out the property with more beds without the added cost of another bedroom. Typically in order for a property to be classified as an investment property in terms of your personal taxes, it must be occupied by you, as the owner, for less that 14 days per year.

The good news is we are well versed in second homes and investment properties here in Sun Valley. If you are looking to purchase an investment property, we can help connect you with rental companies that can make projections on investment income. We can also provide insight as to the amenities renters are looking for and whether short or long term rental will be the best way to go.

With low inventory, rental income is increasing in the valley. So now is the time to buy in if you have been thinking about it. Get in touch with Kelsey Bates or Darlene Young to chat about your goals and we can get you a list of properties that might fit the bill!

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