When you imagine owning a second home, your daydream might be very different from someone else’s.
You could be picturing a cozy cottage by the lake for you and your extended family to enjoy or perhaps a sunny retreat in Florida for you and your spouse… or maybe you’re thinking about an investment property or even a charming place abroad.
Today, we’re going to look at the third daydream on that list: Investment property; specifically, buying homes to use as short-term rentals.
High Demand for Short-Term Rental Opportunities
The short-term rental market changes rapidly and can have a significant impact on local communities and economies. Across the country, municipalities are scrambling to strike a balance between maintaining property rights and sustaining neighborhoods.
Younger generations are playing a large role in current market trends. Many keep their first homes as rentals when they purchase their second home, contributing to the inventory problem. In areas like Door County, the tourist impact was an astonishing $600 million last year. This surge in activity is driven by out-of-area ownership and people from outside the state flocking to places like Crivitz, Minocqua, and the Upper Peninsula.
At our agency, we’ve seen an explosion in demand for cottages and recreational properties. For example, a small piece of land with a camper on it received 26 offers recently, whereas it would have had just one offer, pre-pandemic. The second home market is booming!
This isn’t true across the country. Florida’s market, for example, is experiencing a slowdown due to high insurance rates and uninsurable areas. HOA fees have also skyrocketed following recent hurricanes, making it difficult for many homeowners to afford them. Consequently, there’s a surplus of inventory in coastal areas. This trend is somewhat mirrored in Texas, particularly in Austin.
Despite these challenges, second homes remain valuable investments. They can serve as income generators through rentals, helping to cover taxes, or even becoming a lucrative source of retirement income. Managing a few rental properties can help you ease into retirement while providing a new source of profit. Property managers can handle the workload for a fee, typically around 20% of the profit.
It’s important to know the risks associated with vacant properties, such as squatting. People moving into vacant homes and then claiming residence can lead to costly evictions. Keeping a close eye on your property can prevent such scenarios.
Augusta Rule and the NFL Draft
You’re living under a rock if you don’t know that Green Bay is hosting the NFL draft in 2025! People wanting to rent out their homes to visitors will be happy to know that the Augusta Rule allows homeowners to rent their houses for up to 14 days without being subject to certain taxes.
It’s because of this rule that properties in specific areas, especially near Lambeau Field, are selling at significantly higher prices due to the potential for short-term rentals. For instance, Kenwood properties have seen prices rise from $125,000 seven years ago to well over $375,000 recently. We like seeing small investors (rather than big corporations) in markets like Ashwaubenon.
Three out of four sales in Ashwaubenon these days are investors, not homeowners wanting to live in the neighborhoods, which has had an impact on local schools.
However, renting out homes during major events comes with its challenges. It’s critical to have solid contracts and be prepared for worst-case scenarios, such as potential damage to your property.
Owning real estate has consistently proven to be a solid investment strategy. Mark Twain once said, “Buy land they’re not making any more.”
Acquiring property, especially one that can create memorable vacation experiences, opens the door to a potentially rewarding second career. Balancing the benefits and challenges of second-home ownership requires careful planning and an understanding of local real estate trends. We’re here to help you if you decide to explore it!
