Duarte/Downey Real Estate Agency, Inc



Posted by Duarte/Downey Real Estate Agency, Inc on 5/20/2018

Owning a second home or vacation home is the dream of many Americans hoping to retire in style. However, owning a second home can also be a huge financial asset and even an added form of income if you’re savvy with the rental process.

What stops most of us from buying a vacation home in our ideal getaway? The funding, of course. But, there are ways to plan ahead to ensure you’ll be ready to take the plunge and purchase a second home when the time comes.

In today’s blog post, we’re going to be talking about the steps to buying a home away from home and give you some tip on how to accomplish this goal in the most financially-sensible way possible.

1.  Location is Key

When you buy a second home, you take on all the responsibilities of homeownership a second time. Since you won’t be around every day to tend to maintenance tasks and troubleshoot problems, you risk discovering costly repairs that could otherwise be avoided.

The most common issues to be concerned with are frozen pipes in northern climates, flooding in coastal areas, and problems like pests that can be found just about anywhere.

Depending on your budget, you might want a home you can drive out to on the weekends, meaning somewhere close by to your primary home. This option also makes it easier to stay up-to-date on home maintenance tasks before they become an issue.

2. Try before you buy

If your ideal vacation home is in an area you’re not totally familiar with, it’s a good idea to visit the neighborhood, talk to the locals, and gain their perspective on the area before buying.

This trip will also give you a sense of what you can expect to spend each time you visit the home. And, if you plan on renting out the property when you aren’t using it, you’ll be able to gauge what a reasonable rent price is for the location.

3. Earning income from your vacation home

Making extra cash from a home that you get to use pretty much whenever you want. Sounds like a dream, right? It can be if done properly, but you’ll need to ensure a few things before you can start earning income from your vacation property.

First, be aware that investment properties often require a larger down payment (typically 30%). Lenders also charge extra interest on homes that will be rented out.

Finally, there are local and state-level laws you’ll need to adhere to. These laws are designed to protect your interests as well as the people who rent out your property, so make sure you use a standard rental agreement for your area.

4. Making an offer

You’ve been here before. Once you’ve decided on a home, it’s time to start crafting your offer and negotiating with the seller’s agent.

However, before you pick a number, do some research on all of the expenses you’ll be paying on the house in question. Property taxes, homeowners association dues, utilities, and any other costs should be on your radar before determining if it’s the right home for your budget.

You’ll also want to be aware of the stipulations of renting out a property you own. This includes reporting income from renting your home to the IRS.


Now that you know the steps you’ll need to take to move toward your goal of buying a vacation home, you’ll be better equipped to make decisions that are best for you and your family’s future.





Posted by Duarte/Downey Real Estate Agency, Inc on 5/22/2016

Have you always dreamed of owning a second home? While owning a vacation home may see like a huge expense, it can also provide some savings. There are special tax rules and regulations that apply to second properties that could have you vacationing on the cheap. Before you buy a second home you should consider how you will use it. The Internal Revenue Service will categorize the home for tax purposes on how it is used. Here are the ways it can be categorized: Residence: It will be considered a residence if you use it for personal housing at least part of the year. If your home is a residence you can deduct the mortgage interest under your vacation on line 10 of Schedule A. Investment: If the property is rented most of the year, it's considered a rental or investment property. In order to have a deduction on an investment property your rental deductions can't exceed gross rental income, less interest, taxes, and costs to advertise the property. If your income totals more than the rental income received you won't be able to list the loss (the excess expenses) on your income tax return. Another benefit of a rental property is that you may be able to deduct the value of your rental property over time. This is called depreciation. Depreciation is the wear and tear on a property over time. This can all be confusing so it is best to contact a tax advisor before purchasing a second home. There are some other key points to keep in mind: If the property is purely an investment, all the expenses are deductible against the rent. You don't have to claim income if you rent the property for less than 14 days a year. There are lots of other rules about timing and claiming a property as a residence or an investment. Always make sure to consult with your tax advisor.