We’ve been back to the grind for over a month now and it’s time to start thinking about the next vacation, err, second home.
The trend for second homes has been thriving in recent years due in large part to record low mortgage rates. Vacation home purchases soared in 2014 by 57%, according to the National Association of Realtors (NAR), yet home prices fell by 11.1%¹. Whether you’re a baby boomer nearing retirement or millennial with investment equity, now is the time to buy as mortgage rates have long been predicted to be on the rise.
The benefits of a second home are vast; quiet retreat, family retreat, future primary residence, short-term rental to offset other costs. “People are also buying relatively small homes, with a median size of 1,500 square feet,” says Jessica Lautz, director of surveys and communications for NAR in Washington D.C. “Some choose to buy condos and townhouses, which are 46 percent of the market compared to 54 percent single-family homes.”²
While many second homes are desired within a short drive for weekend getaways, coastal and resort areas are most popular. This Hilton Head, S.C. home (right) offers many resort lifestyle amenities, such as a gated beachfront community, shops and restaurants.
(Source: Hilton Head Island MLS)
Las Vegas is another resort city brimming with an array of housing within master planned resort communities featuring luxury hotels, golf courses, manmade lakes, and a town center with shops, restaurants, and a casino. Blue Heron Design Build is one such custom builder in the area, exceeding in innovation, flexible floorplans, energy efficient technology and exquisite details.
Michele Lerner’s tips for buying a vacation home³
• Keep in mind that you’ll need to pay property taxes and homeowners insurance on the second home. In addition, you could need pricey flood insurance if you buy near water.
• You’ll need a plan for maintaining the property in your absence. If you hire a property management company, that could add to your costs. Moreover, if you plan to rent your home frequently, you also may want to work with a property management company to handle the rentals and maintain your home, which will reduce your rental income.
• While your mortgage interest payments on a second home are tax deductible up to the first $1 million of financing, your tax situation changes depending on how much of the year you rent your property to tenants.
¹NAR’s 2015 Investment & Vacation Home Survey
² ³ Michele Lerner, The Washington Post, May 28, 2015