You know the feeling: You’ve just wrapped up a wonderful vacation! Now you’re going through withdrawals as you head back home to the drudgeries of everyday life. While there may be no way to escape your job (short of winning the lottery), more and more people are hanging onto a little piece of vacation by investing in a second home.
Buying a vacation property can be a wise way to invest disposable income and diversify your assets — and a growing number of people are doing just that. In record numbers, Baby Boomers across the country are realizing their dreams while taking advantage of favorable tax laws and historically low mortgage rates by opening the door to a second home.
Buying a second home is often different than primary home purchases, so here are some tips if you’re considering the investment of a vacation property:
1. Determine the best location for your vacation home.
The most popular locations for second homes are near the ocean, lakes, mountains, and more rural settings than urban homes. They’re also typically less than a day’s drive from primary residences.
2. Research locations.
A real estate professional is an invaluable resource for distant places. Realtors can highlight areas of interest and offer important information on other issues such as affordability, climate, and population.
3. Identify your favorite pastimes.
Vacation living equals more leisure time, so think about your recreational interests. Many people are buying vacation homes near golf courses, beaches, ski slopes, boating facilities, and biking, hiking, or horseback riding trails. What is your favorite leisure activity?
4. Know the income tax laws.
Vacation homes that are used primarily by the owner are considered personal residences. Individuals can deduct a certain amount of interest from these homes.
Vacation homes can also be rented out for two weeks each year, while still allowing owners to benefit from deductions in property taxes. Involve your tax professional in this financing part of the deal.
Almost every real estate market has a seasonal slump when buyers are scarce and purchase costs drop, so do your research to find the best time to buy your vacation home! You can also use local brokers and mortgage lenders who know the market and can price competitively.
6. Visit the destination.
By visiting the location, you can get a feel for the travel time and the area’s culture and resources. Many people who buy a vacation home ultimately use the property as their primary residence upon retirement, so it’s extremely important to find a location that fits your long-term plans.
Investing in real estate is a historically good choice, and second homes are no exception. Do your homework and you’ll be on your way to finding your perfect new home away from home!