Second homes are primarily meant for personal use and enjoyment, such as vacation retreats. Owners typically occupy the home for part of the year and must be cautious of IRS limits on rental use. Otherwise, they risk reclassification as an investment property, affecting tax treatment. Conversely, investment properties are acquired to generate rental income or appreciate in value. These properties are treated as income-producing assets, focusing on tenant rental or resale potential, rather than personal enjoyment.
A second home works best if lifestyle and personal enjoyment are the main priorities, with only occasional rental use. This property is primarily for personal enjoyment.
An investment property is purchased with the primary goal of generating rental income and/or building wealth through appreciation. It's treated as an income-producing asset.
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