Want to buy a vacation home? Here are

123rf.com By Ruby Frazier

Want to Buy a Vacation Home? Here Are Five Things You Need to Consider

There are many reasons why people buy a vacation home. One of them is to save rental costs, which could amount to tens of thousands of dollars depending on how frequent you go. If you are in the pondering stage of buying a vacation home, you are not alone. The National Association of Realtors reported that the vacation home sales in the first quarter of 2021 rose 57.2% over 2020. You may ask how this is possible, considering that the Covid-19 was still active.

Founder and President of Suburban Jungle Alison Bemstein, revealed that people are pushing for the second home market in a bid to maintain a good work from home relationship. Their primary residence is already their office, so having a vacation home is more like spending some time away.

While it isn’t difficult to buy a vacation home, considering the multitude of options available, is it ideal to acquire one? What are your reasons for acquiring a vacation home? Before you cash in on that attractive property near the beach, there are a few points you need to consider deeply.

FIVE THINGS TO CONSIDER WHEN BUYING VACATION HOME ANALYZE THE PROS AND CONS

Like any significant financial decision, it would be ideal to know why you are cashing in on a vacation home. Even if you have made your choice, it’s still essential that you x-ray the real intentions again for buying a vacation home, the benefits and the drawbacks before committing.

One common benefit of buying a vacation home is to save costs on rents. What you could be paying in mortgages annually could be comparable to your monthly rent. If you are the type that spends two to three months on vacations, check out the costs of renting vs the cost of buying, and you will realize that having your own place is better than renting.

Another benefit of buying a vacation home is that it could serve as passive income. You could earn money by renting it out if you aren’t going to stay in the vacation home all-year long. Technically, your vacation home has become your investment, and know that it will increase in value, especially if situated in popular areas near the beach.

With your own vacation home, you can enjoy longer vacations. It’s unimaginable spending as high as $300 per night at a hotel. If you are considering spending six days with your family, the costs would run into thousands of dollars. Your vacation home is yours. You can decide to stay for as long as possible and you could work from home if you work remotely.

One major drawback of buying a vacation home is that it’s expensive. It isn’t just about buying the property; there are maintenance costs that you have to pay, property taxes, insurance, utilities, etc. Just like your primary residence, you’ll have to maintain and keep it secure. The house will be empty most of the time, so you have to spend money to install security cameras, ensure that pipes don’t freeze in the winter, etc. What’s the point of paying that gargantuan yearly mortgage if you stay in the vacation home a few days in the entire year?

TAKE NOTE OF EXTRA COSTS

It’s possible that you might be paying two mortgages simultaneously, but do you know that other smaller expenses could spring up? These hidden local costs could come in homeowners association fees, compulsory infrastructure projects, etc. Renting out your vacation home can also cost you.

Some guests don’t care about the damage they cause or the equipment they ruin, and you might realize this when they have checked out. This will prompt you to hire a property manager, which would cost extra money. Add this to the costs of maintenance and you could be paying a lot of money for a property you don’t spend often inside.

CONSIDER THE DOWN PAYMENT

Securing a mortgage for your second residence is difficult for some lenders, unless you are paying cash. You could find some lenders that require between 25% - 50% down payment for second or third residences. Ensure to check out your home financing options before you opt for buying a vacation home.

THINK ABOUT TAXES

Homeowners leverage the mortgage interest deduction on a vacation home to lower taxable income. If you are filing jointly as a married couple, you can deduct the full interest on mortgages. Tax breaks are offered to those that rent out their vacation properties less than 14 days in a year. If you mix renting and vacationing, things can get a little complicated. Discuss your taxes with a tax professional before making any buying move.

ASK YOURSELF “IS THIS A GOOD TIME TO PURCHASE A VACATION HOME?”

Many people didn’t envision the coming of the pandemic. It affected the market heavily, skyrocketing prices of houses, especially singlefamily homes. No one knows what would come next as far as we are concerned. This is why you should be wary of the time you intend to purchase a property, especially vacation homes.

The location is also important. A viable location will maximize your rental income if you intend renting it out. Still, you need to think it through if it’s worth buying a vacation home at that particular period.

CONCLUSION

There are various factors that you need to consider when buying a vacation home. If you can stomach the running costs and tax payments, you can purchase a vacation home. Many second home owners try to eke out the next month’s mortgage payment from their rental income, and most times, it backfires. So, consider your options carefully to avoid being on the losing end.

To help you in the best possible way, contact Ruby Frazier, a real estate agent of The Power Is Now. Frazier can help you secure a vacation home in the right location at the ideal price.

References

https://www.google.com/amp/s/www.millionacres.com/amp/real-estate-investing/ rental-properties/real-estate-101-heres-what-you-need-know-you-buyvacation-home/ https://realestate.usnews.com/real-estate/articles/things-to-consider-beforebuying-a-vacation-home

WHAT HOME SELLERS SHOULD KNOW ABOUT TAX REFORM

Here’s what home sellers need to know about the Tax Cuts and Jobs Act that was signed into law December 2017.

MOVING EXPENSES

• Moving expenses are no longer tax deductible, except for members of the Armed Forces.

HOME PRICE IMPACT

• California’s median home price is projected to increase 3.2 percent in 2018, which is good news for home sellers.

• Properties priced below $500,000 may see an approximate 4 percent increase in price.

• Properties valued at $750,000 may see a price increase of 2.4 percent, while properties at the higher end could inch up 1.5 percent.

• Properties priced between $1 million and $1.5 million could still see some appreciation overall, but will likely be at a growth rate of less than 1.5 percent.

HOME SELLERS HOME SALES IMPACT • Taking into account the impact of tax reform, home sales in California are expected to increase 0.3 percent in 2018. • Demand for homes priced $600,000 and below will remain strong, due to limited housing inventory. • Homes priced $750,000 - $1 million could experience a decline in sales of up to 0.9 percent. HOUSING SUPPLY IMPACT • The supply of available homes for sale also will be slightly impacted, as homeowners may delay trading up/down to their next home. • Overall, the California housing market is expected to see a decline of 0.3 percent in active listings in 2018. Disclaimer: This is not intended to provide legal or tax advice. Application of provisions to particular tax situations need to be discussed with an accountant, CPA, or tax attorney.