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by: Elaine VonCannon
Owning A Second Home Is Easier Than You Think
Buying a second home is a serious financial commitment, but
it is can also lead to a feeling of complete freedom. It can
provide you with a vacation home, a place to escape from your
mundane routine and an investment in the future for when you
retire. Aging and wealthier households, smaller families and
new technologies that allow professionals to work from remote
places are all significant demographic trends. These trends
indicate that buying a second home is becoming a more reasonable
option for many Americans. The recent changes in tax laws
are also making second home purchases more affordable. Strategically
planning your purchase, consulting a trusted professional
and taking your time are the keys to making the perfect investment.
Strategies For Retirement Investments
Planning for retirement early is smart, especially now. Many
experts believe that as the Baby Boomer generation gets closer
to retirement property values will increase at a rapid rate.
More people will be buying second homes in high demand locations
so locking in a lower price now can save thousands. If you
are buying a house you want to retire in later be certain
to consider all the possible changes and growth for the area.
Many times development and increased populations change the
face of a seemingly perfect location within just a few years.
Another alternative to consider is investing in a home and
using it as rental property first. At retirement you can choose
to improve and make the rental home your primary residence.
You can then sell or exchange and buy the retirement home
of your dreams.
Tax Advantages Can Be Found Everywhere
Regardless of the avenue you take to invest in your retirement,
the IRS offers tax advantages in a wide variety of ways. Mortgage
interest and local and state real estate taxes are all deductible
if you live in your second home a portion of the year. Write
offs are limited to two homes. If you rent the home for less
than 15 days you do not have to claim the rental income or
pay taxes on it. If you rent your second home more than 15
days you must report the rental income. However, now all of
the expenses used to run the property are deductible. Property
taxes, interest, insurance, repairs, utilities, supplies,
cleaning and maintenance are all considered expenses. Equity
in your first home can also help with the purchase of a second
home as a retirement investment. A home equity loan or line
of credit can be used to cover the down payment on a second
home. Be aware however, that borrowing in this way only allows
the first $100,000 of equity debt to be written off.
Get Creative About Your Investments
Another tax strategy is using the IRS Code, Section 1031.
Section 1031 says no gain or loss will be recognized in the
exchange of property held for use in an investment. This allows
savvy investors to purchase a property and later exchange
it for one of like kind. For those planning to retire this
means you can purchase a second home as a rental property/vacation
home and build your investment. At retirement you can then
exchange the property for the dream home you have always hoped
for and defer the capital gains tax. The savings is incredible.
Of course, real estate deals like this can be tricky so always
take advice from a real estate professional and be certain
all the transactions are done legally.
On Your Way To The Retirement Plans You Hoped For
Retirement can be a stressful topic for many people. However,
more and more middle aged Americans seem to be using forethought
and common sense to build the life they know they want to
have after 65. Education, creativity, clear thinking, asking
questions and knowing the kind of future you want to invest
in is the way to achieve success. Using the tax system strategically
to reach your goals will lead to a retirement full of joy,
comfort and quality time to do what truly matters. When you
are ready to search for a second home, or a place to start
your retirement, enlist the help of a seasoned REALTOR. One
that knows the market of the area you have targeted for your
purchase and an SRES or ABR designation after their name.
The SRES designation is the most important qualification to
help you find the assistance you need. Now that you are ready
don’t wait, start making your dreams come true!
About The Author
Elaine VonCannon is a REALTOR with RE/Max Capital in Williamsburg,
Virginia, and she manages investment property. Elaine is also
an Accredited Buyer's Representative as well as a Senior Real
Estate Specialist. She has helped numerous clients invest
in and make money on property in Southeastern Virginia. She
can be reached at www.voncannonrealestate.com.
vonmor1@cox.net
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