The average home values is on the rise, and many Americans are looking into real estate as a financial investment. Predominately, the vacation and second home market is commandeered by the baby boomers. But, the stability of buying a home today means there is more room for families and individuals to take part. Many use the opportunity as a way to turn their favorite beach destination into a vacation home. Others intend to rent out the property to make some extra cash or as a future retirement home. Regardless of the reason, there are a few options you will want to consider before you purchase a vacation home.
Assess Your Goals and Decide if It’s the Right Time to Buy
Before you invest in a new property, you’ll want to take stock of whether or not this is the right time to buy. The market should be high on your list. It will determine whether or not you can afford a vacation home. But why you want one will help to determine the trajectory, you follow to purchase. Will this property eventually become a retirement home? Will you use it as a rental space to make passive income? What is near the vacation home?
Vacation homes that are used to bring together friends and family will want to be in an area where everyone can quickly come together. There should be plenty of activities to enjoy nearby and within a comfortable driving distance of an airport. It seems straightforward, but when you factor in the elderly or the family members with small children, you’ll quickly realize how much thought needs to go into the location.
Almost 25% of vacation homeowners are interested in renting out their property to make additional income. Plans to do so should include a property in an area with multiple rental seasons. Naples, Florida has close to seven months of in-season rental months making it an ideal location to purchase a vacation home to make some extra money.
Rent Property in the Area Before You Purchase
Renting property before you buy will highlight a few different areas of consideration. If you are planning to move into the home as a retirement option down the road, the house and the area need to feature the amenities that are important to you. Visiting different seasons will also help. You can experience first hand the natural ebb and flow of the crowd patterns, when the “snowbirds” arrive, and how the weather plays out. You will also learn what area of Naples you prefer. You might want to be closer to town or favor something along beachfront.
Stick to Your Budget When Buying a Vacation Property
Your second property shouldn’t be a stretch to afford. Having a vacation home is an opportunity to escape issues. Not a chance to create them. Maxing out your budget on a vacation property will reduce your ability to afford to hire maintenance help. If you plan to rent the property that will eat into the resources for lawn care, cleaners, and property management. Unless you live near the vacation home, this will become a challenge if you don’t have the extra cash.
Be Aware of the Taxes That Come With a Second Property
Understanding and planning for taxes make a tremendous difference. Each state has their own rules and regulations for property taxes. Fees are calculated in Naples by an appraiser who according to the county’s website “weighs such factors as fair market value (willing buyer/willing seller), geographic location, how the property is used, etc.”
Generally speaking, the mortgage on your vacation home is tax deductible. If it becomes a rental property, you are required by law to claim any income made to the IRS from renting the property for longer than 15 days. It is possible, however, to begin deducting the expenses that you accrue from running the vacation home. Deductions can include cleaning, property management, utilities, etc. Realistically, anything you must pay in order to maintain the house becomes tax deductible.
Conserve Your Estimate if You Plan to Rent Out the Property
Set realistic expectations if you plan to rent the property. Many vacation homeowners don’t prepare for an off-season. There are some months where people travel less, and you’ll want to account for this is in your estimates. Fortunately, in Naples, the weather is ideal, and roughly seven months out of the year you can expect to have renters in your home. Between January and March, you can even increase the rental prices to accommodate the “high season” where there is an influx of travelers. This price increase will help see you through the leaner months.
If you own a vacation home and are looking for a licensed Florida Community Association Manager (CAM), Paragon Realty is here for you. There are very few others who have the same perspective towards maintaining relationships and condominium governance. Visit our website today to learn more.