Monday, September
6 2010
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Monday, September
6 2010
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Announcing a new acquisition!!
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What's New at Forte for the year 2008 March 2008B - During the Real Estate Freeze, Vacation Homes Might Be a Warm Spot By Forte News Department Many
of us have taken a vacation and found an idyllic spot where we’d love to
retire, spend the weekend or telecommute. Some people have actually bought
property spontaneously while on
vacation – and while that’s not always a horrible idea, it is better to have a
strategy. Finding
a relative bargain on vacation property involves research and a solid knowledge
of your own finances. It involves knowing something about the market, too. Some
thoughts: Who else is buying? Any real estate purchase involves a
market analysis. Don’t assume that just because the residential market’s in
trouble that vacation real estate necessarily follows where you’re looking.
Keep in mind that in some areas of the country that foreign buyers are a factor
thanks to our wheezing dollar. If you like the area and the property, talk to
real estate agents, residents and other people who know the town well to see if
you can be ahead of the curve in making a purchase. Know where your money’s coming from. There are
plenty of people who finance second homes out of the equity from their first
home, but given today’s slow real estate market, it’s a risky option. Before
you even start looking for a property, think about what a second home purchase
will do to your overall financial picture. First determine the impact on your
long-term financial plan. Will you
still be able to retire at the same age?
Will you have enough money to educate the kids? Then look at your lending options. Many lenders require buyers to put down at
least 20 percent on a second home. Keep in mind that your primary home lender
may not want to tackle a vacation home mortgage. While you’re planning, clean
up your credit first, shop your lending options and get pre-approved first.
Above all, get some advice from an expert like a Certified Financial Planner™
professional. Understand what you’re buying. Even if you
haven’t pinpointed a specific home or condo, you need to understand all the
cost and environmental issues of owning property in that community. You need to
know appreciation rates on similar properties and if there are plenty of sale
signs nearby (do people want out?). You need to know about all the potential
environmental risks to your property from hurricanes to mold. Plan for upkeep: An unattended structure is subject
to crime as well as wear and tear that can accelerate when owners aren’t
present daily. Talk to your insurance agent about insuring out-of-town
property. Also, while there are often qualified paid caretakers in vacation
communities to help protect and maintain your property, they can be expensive
and you need to make sure they’re bonded. Think of anything terrible that can
happen to a property and then plan solutions – before you buy. And don’t forget
the cost of utilities, telephone, cable, property taxes, etc. All these upkeep costs often add up to a
surprising amount. Is it a fixer-upper? Keep in mind that in some resort or
vacation areas, property may be landmarked or otherwise legally protected even
if it looks like it’s falling down. Before you become convinced you’ve snagged
a bargain and you’re dialing a contractor, check with local real estate agents
and City Hall to investigate all the possible protections and restrictions on
the property you’re examining. Are you going to rent or occupy? Renting out a vacation home is a
good way to cover some of the cost, but lenders often factor in a 25 percent
vacancy rate when determining your qualification for the loan. Plus, you have
to play landlord with people you may never meet, and that can be risky. Rental
property is a business, so treat it as such. Talk with your tax advisor.
Vacation homes may or may not offer some tax benefits to you depending
on your overall tax situation. Ask your
tax advisor to run the numbers for you.
But don’t make the move for tax reasons alone. If your dream vacation
home fits into your financial plan and life and you’ve done your research, it
may be time to buy. March 2008 — This column is produced
by the Financial Planning Association, the membership organization for the
financial planning community, and is provided by David W. Henion, CPA, a local
member of FPA. | ||||||||||||||
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