Why Now Is The Best Time To Buy A Second Home

How can you increase your personal wealth with an investment that lets you have your cake and eat it   too?

The Answer Is A Second Home
You've probably seen your own home increase in value and add to your wealth. Buying a second home - no matter whether for pleasure or investment - can offer you another way to
invest in the future while you benefit now from tax breaks.

Although only 7 percent of Americans currently own a second home, experts believe that demand for second homes is about to skyrocket, as the bumper crop of 40 million baby boomers reaches prime second-home-buying age in the next few years. No matter how they crunch the numbers, 7 percent of 40 million is a lot of demand.

And, as demand for second homes rises, so does the potential for rising values for those who get in on the ground floor now.

Don't Wait!
To avoid paying top-dollar for your second home, the best advice is buy now. Now's the time to start enjoying your investment, before demand for all types of second homes may put prices beyond reach.

You may be thinking of a classic single-family home in town or country, a rustic mountain retreat or a warm winter bungalow, a contemporary ski or golf villa or a comfy condominium at the beach or in the city. You may be dreaming of a seasonal get-away or you may want one with year-round appeal. Regardless of your preference, the best part of owning a second home may be that you're building your wealth and having a great time doing it!

Why Owning Two Is Twice As Good
You probably can already imagine yourself enjoying life in your second home - maybe even retiring there - doing what you like to do most. But have you thought about why investing in real estate historically has been one of the best ways to build wealth? Here's why.
When you buy a home, you're likely to use borrowed money. That's called "leverage." Say you buy a $100,000 second home with a 10% down payment. Suppose the property appreciates a modest 5% and the second home becomes worth $105,000. You've earned $5,000 on your investment of $10,000, an increase of 50%. That's an impressive return on your money! (Financing costs would, of course, lower the net yield.)
Remember, second homes are often a luxury and can be a volatile market, so it's critical to buy wisely. Ask yourself: How do you spend your free time now? How often will you visit? How much travel time and cost is acceptable? Do you want a maintenance-free second home? Do you enjoy all the seasons? Does the area have a stable growth history?

Don't Go It Alone
Buying a second home can be a challenging task, especially if you're looking in a location far from your first home. The best advise is don't go it alone. Not every second home for sale is a good buy.

You'll want to be sure community services and privileges from garbage collection to pets policy are right for you, the amenities are up to snuff. purchase and owning costs are affordable. What's more, be sure the home itself measures up and that you can live with the local taxes, any association fees or building restrictions - and lots more.
As with the purchase of your current home, invest with the resale market in mind. Don't take a chance on what's probably the second biggest investment you'll ever make.

Help Is Close To Home
There's no need to look further for help. Our real estate experience puts us in a position to provide you with the assistance you'll need. We can start by telling you how much home you're qualified to buy.

Then, if you're thinking of buying a second home within our area, we'll be able to show you all homes listed for sale and bring you up to speed on everything from recreational and health facilities to shopping, community organizations and more.
If you're interested in buying a second home elsewhere, we can make sure you're introduced to a qualified second home specialist at your preferred destination who can help you find exactly what you're looking for.

Check out how homeowner tax breaks can save you big money when you purchase a second home. Then, please call us to learn more about how our professional real estate services can make your dream a reality.

Cash In On Extra Savings From Uncle Sam Second Home Tax Breaks
1. Mortgage interest and property taxes on a second home may be tax deductible (depending upon the use you make of your second home), just as are the interest payments on the mortgage for your primary home. See below the tax treatment for "second homes" and "vacation homes.
2. Interest on a home equity loan, whether a second mortgage or an equity credit line is tax deductible. It doesn't matter whether the loan is secured by your first home (a common down payment source) or second home. There are some limitations on the deductibility of equity loans; ask your tax advisor for your specifics.
3. You may be able to deduct rental expenses including depreciation if the government considers your second home to be a "vacation home." The key is what Uncle Sam calls "second homes" and "vacation homes" because they have separate tax rules depending on the proportion of owner's personal use days versus rental days. A residence is considered a second home if it is used personally more than 14 days or at least 10% of the number of days it is rented. It's a vacation home if personal use is 14 days or less, or less than 10% of the days it is rented.

For a second home, all mortgage interest and property taxes are deductible as additional itemized deductions. If there's rent income, other property expenses may be deductible, but only up to the amount of the rent income (losses are not allowed).

Owners of a vacation home may claim rent expense deductions other than interest and taxes, including depreciation of the property, even if it results in a loss. When personal use of a vacation home is involved, deductions are determined by allocating expenses, including interest and taxes, proportionally between the rental and personal use periods. See your tax advisor for details.

Tax laws are complicated and constantly change. Be sure to consult your professional tax advisor.

4. Convert your second residence to a principal residence for two years for either you, your' spouse, or both of you and shield $250,000 to $500,000 of gain from capital gains tax. You can qualify for this break if, during the five-year period leading up to the sale date, the property was owned for a total of at least two years and used by you, your spouse, or both of you as a principal residence for a total of at least two years. Additionally, only one such tax break can be used in any two-year period. If you both use the property as your principal residence (assuming other tests are met), you can exclude the $500,000 amount; the $250,000 break applies if only one of you uses it. You and your spouse may have different principal residences at any point in time. What establishes a principal residence is virtually a laundry list of factors. Consult with your tax advisor on this.