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Who hasn’t had dreams of owning a vacation home? Depending on your personally preferred way to spend your free time, you may long for an A-frame high in a snowy mountain range, a two-family home at the seashore. How about a cabin by a remote lake? Whatever you long for, it’s time to quit dreaming and begin making that vacation home a reality.
It’s not just wealthy people that own second homes for vacations; it’s mainly clever folks who figure out ways to own the getaway of their dreams.
One couple plans on retiring to the seashore in 15 years and feels that now is a good time to invest in a retirement home. They’re right. Now is the right time to research a location for their retirement. They can start by studying their planned retirement income and state taxes and property costs of a second home.
The first thing all prospective vacation home buyers must realize is that finding a second mortgage may be easier than paying for it. Banks tend to look favorably on good credit risks and may loan out more than you can comfortably handle as an additional monthly payment. Don’t neglect to plan for the added cost of a second real estate tax, another power bill, phone bill, repairs and upgrades when you analyze what you can spend.
A retirement home can be used as a fun getaway for a few weeks each year for the family, but imagine how helpful it will be to your budget to rent out your seaside castle. If you or friends and family stay at your home for no more than two weeks out of the year, the house will be considered income property. On the flip side, if you rent out your second home for no more than two weeks each year, it is considered your home and not income property. If you wish to keep it as a family retreat, renting it out for two full weeks per year can conceivably bring in enough income to pay either the property taxes, or any upgrades it needs, quickly lessening the financial burden.
Ski chalets can profit the owner in the same manner. Rental income can not only pay for the property’s expenses, but can also provide a rental income for the owner if the location is a desirable one. During peak seasons in high use areas - Vail, Virginia Beach or Lake Tahoe - rents soar over $3000 per week. Sounds like a gold mine, sure, but the initial cost of such a cabin, or townhouse can be three times as much as your primary home. It may behoove you, and your retirement or kids’ college fund, to set your sights lower based on what you can comfortably afford. A lake cottage costing $70,000 may only rent for $400 per week, but two weeks per year will pay the property taxes or afford the building of a new dock.
When looking at your annual budget to see if a vacation home is in your near future, be sure to tally up the costs of your annual (or more often) vacation trips. If your family goes to different locations each summer to waterski, swim and boat, then a lake cottage or seaside home may more than satisfy your family’s craving for watersports. If you add up all the costs of renting someone else’s vacation home, towing a boat or jet skis on a trailer for eight hours, dinners out, now you see how it can be done. If you and your famlily are willing to
forgo a different location each summer, or winter, a second home is within your financial reach.
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