Factors to Note Before Purchasing a Vacation Property

If you are mulling over purchasing a vacation home, then you must go over a few considerations before you make the final decision. If done for the right reasons, it can end up being a great piece of investment, as you can save hotel and lodging costs when you visit and then rent it out during off seasons.

  1. Location. Location is essential because you can’t just up and move at will, so consider the area of the property you are contemplating purchasing thoroughly. Will the site accessible and attractive to future guests? Is it located in a place that is prone to natural disasters like hurricanes and storms?
  2. Calculate the associated costs. Many other costs come along with purchasing a piece of property such as utilities, maintenance, homeowner association costs, property taxes, and insurance fees. You want to factor all this and determine that they are well within your budget. If you plan on using rental income to cover some of these costs, then you have to be practical about what rental income typically is in that area.
  3. Maintenance Issues. If you are buying that vacation property as an investment, then you have to make arrangements for who is going to manage it in your absence. Things like security and surveillance are critical. The speed at which you repair a bad pipe or faulty wiring may be the final defense between your house going up in flames or flooding. If you aren’t around for long periods, plan to hire a facility manager who can supervise affairs.
  4. Finances. Run a money check with your financial adviser. Get someone to look at other tax issues such as buying out of state property. You might find that property taxes on that new place may not be deductible. Are you going to be able to meet up with your other long term financial commitments?
  5. Local laws. It’s always necessary to run checks on local laws and regulations about homes in the place you choose. Make sure you hire a local property professional too as they are likely to be more thorough. Are you going to be allowed to rent it out, and are there regulations on the number of days it can be rented out?

Whatever you do, make sure you cover all your bases and consult with our realtor before you sign the final contract.

What To Consider When Buying A Vacation Home

You may be in the market to buy a vacation home in the near future. Getting ready to purchase a second home can be a big decision and a big financial commitment. Aside from a good investment, buying a vacation home brings enjoyment to you and your family. To help you make a good decision on when and where to buy your vacation home, read on. 

It’s All About Location

You need ton know why you want to buy a second home. Do you spend a lot of time in one specific area? Do you want to explore one particular place a bit more on a frequent basis? The reason behind why you purchase a home for vacation purposes will fuel your decision on location. If you’re looking for a simple getaway with your family several times a year, the answer may be different than if you want to have a rental property. Choose a location that has varied seasons. You don’t want the prime time for use of the property to be the same as when you’d like to be on the property with your family.   

Don’t Purchase On A Whim

While it can be tempting to search for homes while you’re on a getaway, you should rent several times before you make the decision to buy in a particular place. Vacations can give buyers this sense of awe that could quickly fade. You don’t want your decision to be fueled by emotion. You need to be certain that you’ll actually enjoy an area for the long term. 

Shopping for a vacation home is quite similar to shopping for your main house. You want to know you’re in a good area and that you’ll enjoy the house or the long haul. It’s tough to do that if you don’t have a basic understanding or appreciation of the area.  

How Often Will You Use The House, Really?

You need to be realistic about how often you’ll actually use your vacation house. It may not be worth it to buy in an area that will only be used one week out of the year. If you know you’ll be able to use the space all of the time, then go for buying a home in the location of your dreams. If, however, you’re unsure of how often you’ll be able to get to the house you might want to think twice. You could do just as well finding a spot that you can use as a reliable rental when you want it. Don’t forget that buying a second home means having a second home to maintain. Not everyone is up for that challenge.           

Should You Buy a Vacation Home?

A beachfront vacation home attracts adults who seek temporary housing during holidays,weddings, graduations and summer months. List your vacation home in a property rental directory and your second house could become a source of regular income.

Consider why you want a vacation home

Yet, the chance to generate more income is probably not the reason why you’re thinking about getting a vacation home. You’re probably eyeing a vacation home because you’ve found a town away from home that you love. Perhaps it’s the fishing,quaint city look and feel, entertainment options or natural views and wide open land that attract you to the area.

Ask your questions about your motive for buying a second house. For example, are you going to use the vacation home to operate a business out of? Are you going to turn the vacation home into your retirement house five or less years from now?

Additional factors to think about before you buy a vacation home include how far the vacation home is from your permanent residence and the number of people who will live at the vacation home. The mode of travel you’ll use to get to your vacation home,costs of travel and who will watch your permanent and temporary houses are other factors to consider.

Don’t only think about the price of the vacation home. For example, if it cost you $600 per person in airfare to reach your second home, it may be more cost efficient to rent a hotel. An instance when travel costs wouldn’t carry much weight is when you rent out your vacation home.

Benefits of buying and renting a vacation home

Advantages of buying and renting out a vacation home include having the space to live in when you visit another town and having the income to cover the second mortgage. After you pay off the mortgage on your vacation home, you can keep the house,sell it for a profit or gift it to your children or grandchildren. The latter option would allow you to keep the vacation house in your family. As with other real estate that you gift to relatives, make sure that you understand and allocate for estate taxes.

When you choose a vacation home, it may make good sense to get a house near a family member. During periods when the house is vacant, this relative could stop by,check the mail, conduct regular cleanings and make the house look lived in, potentially keeping burglars away. Another option is to buy a second house that you can drive to within four hours or less.

This way, you could visit the house on weekends. Make sure that you visit areas that surround your vacation home. Get to know the neighbors. If you don’t trust the neighbors, think twice before you sign a second mortgage.

What you won’t have to pay a lot of attention to are the schools and daycares. You also may not care as much about shopping centers as much as you would if you were buying a permanent home. If the uses for the second home outweigh the costs, taking on a vacation home could be a smart move.

Should I Buy a Vacation Home?

Have you always dreamed of owning a second home? While owning a vacation home may see like a huge expense, it can also provide some savings. There are special tax rules and regulations that apply to second properties that could have you vacationing on the cheap.

Before you buy a second home you should consider how you will use it. The Internal Revenue Service will categorize the home for tax purposes on how it is used.

Here are the ways it can be categorized:

Residence: It will be considered a residence if you use it for personal housing at least part of the year. If your home is a residence you can deduct the mortgage interest under your vacation on line 10 of Schedule A.

Investment: If the property is rented most of the year, it’s considered a rental or investment property. In order to have a deduction on an investment property your rental deductions can’t exceed gross rental income, less interest, taxes, and costs to advertise the property. If your income totals more than the rental income received you won’t be able to list the loss (the excess expenses) on your income tax return.

Another benefit of a rental property is that you may be able to deduct the value of your rental property over time. This is called depreciation. Depreciation is the wear and tear on a property over time.

This can all be confusing so it is best to contact a tax advisor before purchasing a second home. There are some other key points to keep in mind:

If the property is purely an investment, all the expenses are deductible against the rent.

You don’t have to claim income if you rent the property for less than 14 days a year.

There are lots of other rules about timing and claiming a property as a residence or an investment. Always make sure to consult with your tax advisor.