Whether your summer vacation takes you to the beach, the mountains, or any of America’s popular destinations, chances are good you’ll encounter advertising and sales pitches to buy your vacation place. By Steve Cook, Homes.com.
If you are tired of high rents and the hassles associated with finding a good location during the busy season, perhaps they make sense. Wouldn’t it be wonderful for you and your family to have your place at your favorite resort?
Finances are Favorable
With interest rates still low and other financial advantages of home ownership, buying a vacation home might not be as difficult as you might expect from a financial perspective. Mortgage rates are still historically low. You can deduct the mortgage interest on a second home just like your primary residence. You can even rent it out for up to 14 days a year without paying any taxes on your rental income. If you rent it out longer than that, you have to declare rental income, but can deduct rental expenses and depreciate a portion of the property’s value. Real estate agencies and property management companies in many resort areas make it easy to turn your vacation home into a rental by handle all rental and management tasks for a fee. For more information, check out IRS Tax Topic 415.
Finally, a vacation home can be a great investment. You will build equity in your vacation home just like your primary home. Last year the median vacation home price in America was $200,000, up 4.2 percent from 2015 and the highest since in a decade. If you can afford the costs of a second home and do a thorough job of researching the market where you plan to buy, a second home could be a great investment.
Vacation Homes are Hot
As with all residential real estate these days, competition for vacation homes is very tight in many markets. There is a strong demand as the economy improves and more homeowners have equity to use to buy a second home. Some 81 percent of consumers say this is a good time to buy a vacation home, but the supply is tight. Because of low inventories, the share of vacation home buyers declined for the third straight year to 12 percent from 16 percent, but demand remains strong.
Properties are selling quickly in vacation destinations. In May, 30 percent of Orlando listings sold in one week or faster. The boom in Denver homes sales is spreading into the mountains, driving down the average number of days a single-family home spends on the market from 73 days in 2015 to 36 days in El Paso County, in the Front Range south of Denver. In Jacksonville, home values are soaring at 7.7 percent rate in May.
Timing Your Purchase
It’s a good idea to spend some time during the peak season in a destination where you might buy. Be sure it is a place your family loves and will happily return to ever year. Monitor the rental market and talk to a real estate professional to learn about both rental demand and buyer demand in different seasons. Get a feel for the local economy and visit open houses to learn about locations, home designs, and current market trends.
You might discover that the peak of the season is not a great time to buy, even though inventories will be greatest. In fact, the best deals on vacation homes can be found in the final weeks or the high season, or even later. Just as the fall months can be great times for search for bargains during the home selling season because owners become desperate, the best time to buy a ski condo is when the daffodils bloom and the best time for a beach bungalow is just before and after Labor Day. Sellers will have to bargain or lock up their properties for months without either renters or buyers.
Another good time to shop is the weeks before the beginning of the busiest season. Inventory will be growing, and some sellers may be eager to sell quickly. Also, markets where large resort developments with aggressive sales staffs can suck buyers away from older existing homes. Often bargains can be found in the shadow of new resorts.
Tips for Vacation Home Hunters
- Contact the agents for properties on which you are interested during the high season as well as the larger real estate agencies in the market. Work with an agent who specializes in buyers. Let him, or she knows what you are looking for.
- With your agent’s help, do your due diligence on homes that have been listed for months but haven’t sold. Make sure that there aren’t any hidden negatives that are turning off buyers.
- After you return home from vacation, keep in touch properties in which you are interested as the end of the season nears. As time passes, sellers may be more willing to negotiate.
- As time passes, monitor listings online on a daily basis to note price changes and properties listed late in the season.
- Have your deposit and pre-approval letter ready so that you can move quickly when the right opportunity arises.
- To be sure you don’t end up with a home that was a bargain because of its condition, including a home inspection contingency clause of at least 30 days in any contract you put on a home. Allow time for a professional to inspect the property and for you to discuss any necessary repairs with the owner. If an agreement can’t be reached, you can cancel the contract and get back your deposit.
Doug Reece, who works as a realtor for Martha’s Vineyard at RE/MAX, recently worked with a seller who dropped the price of his house from $900,000 to $699,000.
“As a buyer, you’ve got to be ready to hop in the car and get here on short notice when those things happen. Or else someone else will,” he said.
While it’s hard to put exact numbers on it, Kevin Austin, from Cape Cod Oceanview Realty, said people tend to drop their prices around 5 percent just to get people to look at the house and stimulate some activity.
“If people feel they can get a house for cheaper, they’ll usually wait until September and October to see if the price will drop,” said Austin, who specializes in the Orleans area of Cape Cod.
The trend is expected to continue until the end of the calendar year. By the time January and February roll around, many sellers figure that if they’ve already held a property for that long, they might as well hold on to it for another season.
Early spring is another busy season for New England vacation homes, as buyers want to close on a property and use it for the summer.
Nationally, the best times to buy vacation home differ by region and climate, but in general, there has been a 30-percent surge in vacation homes in 2013, according to the National Association of Realtors.
And Lawrence Yun, NAR chief economist, expected this upward swing to continue in 2014. A nearing-retirement baby boomer population and an improving stock market are likely to give rise in vacation home purchases.
Bottom line: Act fast and get yourself to the Cape.
“If you catch the seller at the right moment, you can get screaming deals,” Reece said.
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Re-posted by Scott Freerksen “The Lake Guy”