Buying a vacation, or second home, is a big
investment. Before you take the "plunge", consider these tips from experts:
Spend time in the resort area of your choice
It’s generally a good idea to rent a home there for a season or
two to find out if the commute is manageable and if the area fits your lifestyle. This is
particularly true in the desert if you plan to spend any time here in the summer months.
Decide what amenities are important in a second home
Do you want a golf course nearby? Want to be able to walk to town? How
about a pool and spa? Expecting the kids or grandkids to visit? Are you better off with a
single family residence or a condominium? Each of these questions, and many more, need to
be looked at. A good exclusive buyer’s agent will have the tools to ask the right
questions.
Talk to your accountant about the tax consequences
Shifting your primary residence to a vacation home in another state can
affect your state income tax and your estate taxes. You need to determine just what the
rules are for a "primary" versus "secondary" residence before you
buy.
If you don’t rent out the home, you can deduct property tax and
mortgage interest. If you rent the home fewer than 15 days a year, the income is tax-free,
but you can’t deduct expenses.
If you rent your vacation home out for more than 15 days a year, it
becomes rental property and complicates your taxes. You may have a harder time getting a
mortgage if you are counting on rental income to make monthly payments.
Shop around for insurance
Not just your fire and earthquake insurance. Have you thought about
what title insurance company to use? How about home warranty companies? Are there
differences between companies and their coverages? How about your rates? Who pays for
these premiums. You can keep premiums down with good coverage's by having your agent
explain all the differences and getting you competitive quotes for all types of insurance.
