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Ask Dave

Rental Vacation Property

Nathan needs to be careful if he decides to invest some money in a rental vacation cabin the mountains.

QUESTION: Nathan’s mom gave him and his siblings a piece of property.  They sold the property and, in order to do a 1031 tax-free exchange, he wants to invest the money in a rental vacation cabin in the mountains.  Should he do this?

ANSWER: Resort real estate is one of the most volatile, highest-risk real estate investments.  If you get something with a fantastic view, that was developed well, and has a good track record, you’ll be in good shape.

Just remember that you’re basically buying rural mountain real estate and you need to be sure that you purchase something that will appreciate in value.