Princeton Capital Blog

Consider a Vacation Home for Fun Times, Investment Returns

May 31st, 2011

Glorious summer days at the lake…the grandkids frolicking at the shore…or a warm fireplace as you wait for the perfect powder at your ski retreat. A vacation home builds memories and it can be a great investment.

In most vacation hot spots, second-home prices are at five-year lows. Some in California and Florida can be had for 47 percent below their 2006 price. Bargains are likely to be available within a couple of hundred miles from where you live.

* There’s more to a vacation place than fun and up-front bargains. In the future, the home will be an appreciating asset. Economists say prices are already rising and will continue to rise for at least the next five years.

* The home is a better deal if it’s rentable. The rental potential puts money in your pocket, but it also increases resale value.

* The typical vacation property rents out about 17 weeks a year, according to HomeAway.com. Ask a property management company how much comparable properties rent for by the week. While the rent won’t pay all your expenses, it will help with the mortgage, utilities, taxes and maintenance.

* You will meet and become friends with an entirely new group of people when you own a vacation home. Lifelong friends are made with neighbors and in the community.

* You’ll have tax benefits. Rent it out for less than two weeks, and you won’t have to report the income to the IRS.

* If you rent the home for two weeks or more, you can deduct operating costs, such as maintenance, cleaning, mortgage interest and property tax. You allocate the write-off between personal and rental use.

* As with any rental property, distance is important. Less than 200 miles from your primary home is best.

Finance

* When the property is classified as a second home, you’ll get about the same interest rate and terms as on a home loan, according to HSH Associates.

* If you need the rental property income to qualify for a mortgage, it will be classified as an investment property. The down payment will be higher and the interest rate will be about 1 percent more.

Princeton Capital

Contact Us

Top Work Places 2014
BBB