ATLANTA – April 14, 2011 – Shoppers can find lots of good deals in vacation homes at the moment. In many second-home hot spots, prices remain close to five-year lows. For example, single-home prices in second-home hotspot Napa, Calif., are down 47 percent from their peak in 2006, according to Fiserv.
A buyer looking to cash in on vacation- or second-home values should consider the following:
1. Is it rentable? Even if a buyer isn’t planning to rent, he or she may still want to consider the rental aspects of the property, particularly since a home’s rental potential can affect its resale value, says Catherine Jeffrey, a real estate professional in Fredericksburg, Texas. Buyers should check with the homeowners association or township to ensure that short-term rentals are allowed.
2. How do you plan to use the home? The loan rate depends, in part, on how the property will be used. For example, if buyers intend to use the property primarily as a second home, they’ll pay about the same mortgage rate as a primary residence, says HSH Associates vice president Keith Gumbinger. However, if they plan to get rental income from the property, the property will be treated as an investment, which means they may need to pay as much as 25 percent of the buying price for the downpayment and up to one percentage point more in interest.
3. Are you eligible for the tax benefits? If owners rent the house for two weeks or less per year, they won’t have to report income to the IRS, and they’ll be able to deduct property taxes and mortgage interest. If the owners stay in the home for less than two weeks or have 10 percent rental days, whichever is greater, they’ll be able to deduct operating costs, such as cleaning and maintenance fees, as well as the interest and property tax, says Rick Shapiro, a CPA in West Hartford, Conn. He suggests homeowners talk with a tax expert to find out what tax benefits apply.
Source: “5 Things to Know About Buying a Vacation Home,”
CNNMoney.com (April 5, 20)
