by Courtney Soinski
Whether your second home is an investment or intended for personal use, there are a few key factors that you should consider for the best possible outcome. It is especially important to understand the difference between making the purchase of a primary residence and a second home.
Here are some important considerations to take into account as you search for your new vacation home.
Chances are, you want to buy a vacation home to get away from the stress of urban life in a relaxing location with beautiful views and attractions. Visit the area you're interested in multiple times at different periods of the day before making a decision on that specific locale. Be familiar with the area as well as the features and amenities that your potential community has to offer.
Purchase & Maintenance Costs.
Add up and evaluate all costs associated with buying and maintaining your new vacation home. Be sure to keep this in mind: Mortgage rates for vacation homes are often higher than those in a primary residence.
Do NOT depend solely on rental income to pay your bills. Remember, you'll also be handing over money to pay for cleaning, maintenance, insurance, and possibly management fees. If you're receiving rental income to qualify for the loan, you will most likely have to pay a higher mortgage rate than normal since your lender will view it as an investment property.
If you rent out your home fewer than 15 days during the tax year, you are still allowed to take the deductions for the interest and taxes. On the other hand, if you rent out the home for 15 days or more during the year, you must report all rental receipts to the IRS as income, but you can also deduct operating expenses such as utilities, repairs, insurance and management fees against that income.
Assess and research the potential of renting out your vacation home. Emotions aside, pick a vacation home that will appeal to the largest target market and remember that money factors and demand tend to vary and fluctuate, depending on the economy's state at the time. Also, find out if your homeowners' association allows you to rent out a property in addition to using it for your own vacation needs.
So, before you get up and buy a vacation home on the beach or in the mountains, do all your research and consider every factor. Work with your REALTOR® as well as your accountant to find the best vacation home for you!