Buying a Duplex as a second/vacation home

1 Reply

I am thinking of purchasing a duplex as a vacation home in another state. First, can I do this? Second, can I rent out one half full time and Air BnB the other half when I'm not using it? Also, is this type f property subject to the same 2 year owner occupied restrictions when selling the property to avoid capital gains? In other words could I sell this property after 2 years and avoid cap gains tax without doing a 1031 exchange? 

Dewayne:

I would suggest a totally different plan.  

Buy a duplex because it makes a great business sense and use the profits to pay for your vacations.  This way you can afford to stay in the nicest hotels  and eat at great restaurants.  It is better than hunkering down in a rental duplex and dealing with tenant issues while you are on vacation.   You can also buy a duplex in a place you want to visit so airfare and hotel can be tax deductible against your profits.

To answer your question, the IRS deduction on capital gains is only valid for your primary residence not a vacation home.  

Using half a duplex as a vacation home is not profit optimizing, is not tax-efficient, and gives you less flexibility for your vacation plans.

Free eBook from BiggerPockets!

Ultimate Beginner's Guide Book Cover

Join BiggerPockets and get The Ultimate Beginner's Guide to Real Estate Investing for FREE - read by more than 100,000 people - AND get exclusive real estate investing tips, tricks and techniques delivered straight to your inbox twice weekly!

  • Actionable advice for getting started,
  • Discover the 10 Most Lucrative Real Estate Niches,
  • Learn how to get started with or without money,
  • Explore Real-Life Strategies for Building Wealth,
  • And a LOT more.

Lock We hate spam just as much as you

Get the Ultimate Beginner's Guide

Sign up today to receive the popular eBook for free!