Many Texans will spend their summer vacation renting a house at the beach, near a lake or in the Hill Country. But instead of just renting a place for a few days, have you ever considered buying your own vacation home? If you are fortunate enough to be in the market for a second home, there are a few things to consider to ensure your plan to relax doesn’t stress you out.
Why are you buying?
Your reasons for purchasing a second home may be varied: for a family vacation spot, to rent out for supplemental income or maybe you plan to sell your home and move there when you retire.
If you plan to rent it out, the house should be somewhere popular with visitors to get your money’s worth. To use as your own vacation spot, make sure the house is convenient to get to and its size accommodates everyone who may be invited. If you have a large family with multiple generations, a two-bedroom cabin may not be ideal. Just like a multi-story beach house probably isn’t the best option for a couple’s retreat.
Location is still key
Your next step should be determining where you want to buy a second home. Start your search in areas you already frequently visit. Where do you and your family enjoy spending vacations? Are you avid skiers? Or is a long weekend at the beach more your speed? You are more likely to take vacations if you can avoid the hassle of finding somewhere to stay.
Even if you aren’t planning to rent out your second home, consider buying in an area where you could rent it out. Just make sure the homeowners association or condominium board doesn’t have any bans on short-term rentals. Your Texas REALTOR® will know which areas of the community are best for rental property and which don’t allow it.
Consider your budget
You likely have an idea of how much home you can afford, but does your budget cover all the costs? While collecting funds from short-term renters can help offset your mortgage, be sure to factor in expenses such as the property manager’s fees, maintenance and housekeeping.
Maybe you are thinking about a second home because you’ve heard that the housing market is turning around or that property is always a good investment. Keep in mind that the housing market is unpredictable. Just because you find a good deal doesn’t mean you’ll be able to get your money back as planned. Many people who have vacation homes rent them out when they aren’t using them. But when consumers’ budgets tighten, one of the first expenses to be cut is vacations.
Fun and taxes
When you are factoring in the costs associated with owning a second home, remember that the property taxes are likely to be different than what you pay for your primary residence. And keep in mind that you can still deduct the mortgage interest you paid on a second home, but it won’t be eligible for a homestead exemption if it isn’t your primary residence.
In addition, if you rent the house out for no more than 14 days of the year, the rent you receive is tax-free and you don’t have to report it as income. Different tax rules apply for vacation homes that are rented out more than 14 days of the year. Consult a tax professional for details on your situation.
Work with someone local
A Texas REALTOR® who is familiar with the community will be your best resource when buying a second home. She will know the local market, its amenities and local tax rates and ordinances.
Some Texas REALTORS® have gone the extra mile and earned the Resort and Second-Home Property Specialist certification. This designation tells you she is an expert at working with consumers looking to own multiple homes.
For your real estate needs, please contact Waymond Lightfoot (RE/MAX Genesis) at 210-386-5201.