Think You Can’t Afford a Vacation Home? Think Again



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A vacation home might seem like it belongs squarely in your “dream goals” column—something you’ll invest in if you come into a windfall of money. But the truth is, a second home is more attainable than you think. In fact, it could even be a smart financial strategy! If a vacation home is on your radar, here’s what you need to know.

Vacation Home Statistics

According to HomeAway’s 2016 Vacation Rental Report, 70 percent of vacation home owners pay more than half of their mortgage with rental fees, and 54 percent cover more than three-quarters of their mortgage. That represents an average $28,000 in annual income with fewer than 10 hours per week of work. And since the typical vacation home owner rents out their second home for only 18 weeks of the year, there’s still plenty of time to enjoy the property for your own leisure.

Choosing a Sound Investment

Investing in real estate is far from a sure thing, but there are a few things you can do to make sure the numbers work out in your favor:

  1. Choose a location with a strong rental market. Renting out your vacation home is a great way to generate passive income. But if renters are in short supply or prices are low, you’ll lose money maintaining your second home. And if you select a location that relies on seasonal tourism, like a ski town, you might not be able to use the vacation home when you want to.
  2. Buy smaller and add your own garage space. Sometimes the best choice is to opt for a smaller space. You can save money on the purchase price as well as utilities and insurance. If you buy a smaller freestanding home without a garage, you can easily add a detached prefabricated steel garage that can house your car or function as extra storage.
  3. Vacation for less than two weeks each year. If you use your home for less than 14 days in a calendar year, it’s considered a rental property, and you can deduct rental expenses like management fees and depreciation. While you’ll have to pay taxes on the rental income, you’ll come out ahead if you rent the property for most of the year.
  4. Or rent out your home for less than two weeks each year. If two weeks of vacation isn’t enough, there’s another tax rule that can work to your advantage. If you rent out your home for less than two weeks each year, you don’t have to report the income to the IRS. This is a great option if you’re near a big annual event that lets you charge higher rental fees. You won’t be able to deduct rental expenses, but you can deduct mortgage interest and property taxes. For more information on how rental use affects tax obligations, read the IRS rule or this breakdown from Bankrate.
  5. Buy a home you’d like to retire to—at least temporarily. When you sell a primary residence, the first $500,000 in profit is exempt from capital gains taxes ($250,000 if you’re single). However, this exemption doesn’t apply to vacation homes, with one caveat. If you live in your second home for at least two years before selling, you can take advantage of the primary residence exclusion. This is a smart solution if you want to retire to the beach but aren’t committed to staying long term.

Protecting Your Investment

Making money off your second home only works if you take good care of it. Whether you’re renting or selling, it’s important to keep the property in good repair to get the best price.

If your primary residence is far from your vacation home, hire someone to handle maintenance and coordinate cleaners. If your vacation home is vacant for extended periods, invest in a strong security system and ask someone to check in periodically. If you have a swimming pool, be sure to install safety features like temporary fencing and pool covers to keep trespassers and wandering children out. And don’t forget to maintain the exterior, even when the property isn’t in use. Curb appeal is a major selling point, and you want your property to leave a good impression on prospective renters.

Whether your priority is generating income or having a gorgeous place to vacation, a second home is an excellent option. With the right property, you enjoy a convenient vacation destination, a potential retirement property, and passive income to enhance your lifestyle. Choosing the right vacation property for your personal goals is complicated, so consult your realtor and accountant for help making the best choice.

Guest Post Written By:

Seth Murphy, Papadiy.com

seth@papadiy.com

Never Mind the Cold: Winter Can Be a Great Time for a Move


Courtesy of Pixabay.com.

The need to relocate can arise at any time for any number of reasons. A homeowner may need to pack up and move due to downsizing or because of a job change. If you have a lot of boxes to pack and plenty of furniture, exercise equipment and other large pieces, a moving company is probably your best bet – unless you happen to know a lot of brawny men with time on their hands. But bear in mind that commercial moving is a seasonal industry, and moving companies tend to be a lot busier during the warm months, namely spring, summer and early fall.

It’s not always possible to pick and choose when you’re going to move, because circumstances sometimes dictate when and how quickly you have to do it. Winter may not be the ideal time, but if done carefully and with a vigilant eye on the weather, moving “off-season” can save you money and a few headaches as well.

Be warm, stay safe

On moving day, you’ll be going in and out all day, so be smart about how you dress. If the temperature dips below freezing, keep exposed skin covered and protected from the wind. Wear boots with rubber soles or studs that grip the snow and ice, and apply layers to keep your feet and legs dry and warm. Use foresight and common sense, and leave snow removal equipment (i.e. shovels, ice scrapers, salt, etc.) unpacked in case it’s needed when you arrive.

Track the weather

Of course, the weather can quickly turn a winter move from a great idea into a dangerous venture. Watch the forecast leading up to moving day. If the weatherman predicts snow and ice, track the situation closely in case it becomes necessary to postpone your departure or call it off for safety’s sake. Work with your moving company to plan the safest and most direct route, one that emphasizes major roadways and avoids any scheduled road construction.

Recruit help

When it comes to moving, you can’t have too many extra hands. Don’t hold back – now’s the time to call on all those friends and relatives you helped out on their moving day. Friends can help you declutter, organize and pack everything, make sure all those boxes are properly labeled and, maybe most importantly, be there to lend a smile and an encouraging word when you’ve had enough. The more you can do to prepare ahead of time, the better off you’ll be when it’s time to load up the moving van. Just don’t forget to order plenty of pizza once it’s all ready to go.

The right moving company

Do plenty of online research before hiring a moving company. Take the time to read customer reviews, interview your candidates and ask them for three references. Be sure that whomever you engage is fully insured and licensed – a requirement for any interstate moving company. Once you have a firm estimate in hand, make sure to get it guaranteed in writing, which should include pick-up and delivery dates. Always be wary if you’re asked for a sizable deposit (20 percent or higher), since most moving companies don’t do business that way.

Keep your pets safe

Pets tend to get very skittish when their environment is “invaded” and there’s suddenly a lot of strange people stomping around. The chances of your pet escaping and getting hurt are much greater while the movers are getting you packed up, so find a friend to play pet sitter while all the chaos is going on, or find an affordable boarding service. It’ll be one less thing to worry about on moving day, and that’s worth a lot.

There’s no need to fear moving in winter. It may be cold, but it’s also an excellent way to save money on what can be a very costly expense. With the moving business at a low ebb in the winter, you’re virtually assured of getting the moving date you want.

Guest Post by: Kris Louis kristin@parentingwithkris.com

Credit: Parentingwithkris.com