Posted by Mary-Lou McDonough on 3/11/2019

Owning a second home or vacation home is the dream of many Americans hoping to retire in style. However, owning a second home can also be a huge financial asset and even an added form of income if youíre savvy with the rental process.

What stops most of us from buying a vacation home in our ideal getaway? The funding, of course. But, there are ways to plan ahead to ensure youíll be ready to take the plunge and purchase a second home when the time comes.

In todayís blog post, weíre going to be talking about the steps to buying a home away from home and give you some tip on how to accomplish this goal in the most financially-sensible way possible.

1.  Location is Key

When you buy a second home, you take on all the responsibilities of homeownership a second time. Since you wonít be around every day to tend to maintenance tasks and troubleshoot problems, you risk discovering costly repairs that could otherwise be avoided.

The most common issues to be concerned with are frozen pipes in northern climates, flooding in coastal areas, and problems like pests that can be found just about anywhere.

Depending on your budget, you might want a home you can drive out to on the weekends, meaning somewhere close by to your primary home. This option also makes it easier to stay up-to-date on home maintenance tasks before they become an issue.

2. Try before you buy

If your ideal vacation home is in an area youíre not totally familiar with, itís a good idea to visit the neighborhood, talk to the locals, and gain their perspective on the area before buying.

This trip will also give you a sense of what you can expect to spend each time you visit the home. And, if you plan on renting out the property when you arenít using it, youíll be able to gauge what a reasonable rent price is for the location.

3. Earning income from your vacation home

Making extra cash from a home that you get to use pretty much whenever you want. Sounds like a dream, right? It can be if done properly, but youíll need to ensure a few things before you can start earning income from your vacation property.

First, be aware that investment properties often require a larger down payment (typically 30%). Lenders also charge extra interest on homes that will be rented out.

Finally, there are local and state-level laws youíll need to adhere to. These laws are designed to protect your interests as well as the people who rent out your property, so make sure you use a standard rental agreement for your area.

4. Making an offer

Youíve been here before. Once youíve decided on a home, itís time to start crafting your offer and negotiating with the sellerís agent.

However, before you pick a number, do some research on all of the expenses youíll be paying on the house in question. Property taxes, homeowners association dues, utilities, and any other costs should be on your radar before determining if itís the right home for your budget.

Youíll also want to be aware of the stipulations of renting out a property you own. This includes reporting income from renting your home to the IRS.


Now that you know the steps youíll need to take to move toward your goal of buying a vacation home, youíll be better equipped to make decisions that are best for you and your familyís future.





Posted by Mary-Lou McDonough on 5/17/2013

If you have been dreaming of owning a vacation home now may be the time to buy. Home prices and mortgage rates continue to fall and there are some great deals for buyers looking for a second home. Here are five things you need to know before taking the leap. 1. Prices are at all-time lows In many second-home hot spots, prices are still close to their five-year lows. When the real-estate bubble burst, some of the hardest-hit markets were vacation destinations. Many vacation home areas experienced overgrowth and may now be suffering from foreclosures. 2. Think ROI Consider the possible return on your investment. Whether or not you decide to rent the home out, you will want to consider buying a place that has good rent potential. That's because a home's rent ability can affect its resale value. Before you bid on a house, make sure the homeowners association or township allows short-term rentals. 3. Don't count on rental income If you are planning on counting on rental income to cover the costs beware. According to HomeAway.com, a typical second home property rents out just 17 weeks a year. Make sure to account for the weeks the home won't rent. Plus, you'll need to pay for cleaning, maintenance, insurance, and maybe management fees. Make sure to plan on the maintenance costs of the property being at least 15% of the income. 4. Your mortgage rate depends on how you use the home How you use the home depends on the mortgage rate you will receive. If you plan to use the property primarily as a second home and you'll pay about the same mortgage rate as you would on a primary residence. If your plans are to use the home for rental income and need that income to qualify for the loan, you'll need to have as much as 25% for the down payment and pay up to one percentage point more in interest. 5. Take advantage of tax benefits Talk to your tax guy before you buy. If you rent the home out for two weeks or less you won't have to report a cent of income to the IRS. The good news here, you can still deduct property taxes and mortgage interest. On the flipside, if you stay there for less than two weeks or 10% of rental days, you can deduct operating costs in addition to interest and property tax. But where should you buy? According to CNBC here are the top places to buy a second home. If you are thinking about buying a second home I can help you find a professional agent in that area.