Time to buy a vacation home?

With the uncertainty of the stock market, people are looking for alternative ways to invest. Real estate has always been a good place to invest for the long term. It’s true that real estate values ​​are down right now; however, historically, the real estate market has always recovered. Over the past few years we have seen an extraordinary increase in market value, and investors have been able to buy and “sell” the property quickly for a profit. Those days have passed; however, for the buyer who is willing to hold the property for the long term, a good profit can be made.

Today there is a lot of news about the housing market decline and a large number of foreclosures. That should not be expected to be the case in many tourist areas. Many tourist areas have seen relatively few foreclosures and almost no sub-prime loans. You’re not likely to find a depressed market in beachfront condos, but for those willing to walk a half block to the beach, prices may be significantly lower than a year ago. This is not so much due to the economic crisis, but to over-construction that created too much supply for demand. As the existing inventory of real estate depletes, we should see a smooth rebound in property values. Values ​​could fall further, but it is not likely as construction has slowed and surplus inventory has decreased. For the buyer who intends to hold the property as a long-term investment in a family vacation home or as a retirement home, there should eventually be a return on investment.

Most families plan their vacations well in advance; however, many times they just want to take advantage of a weekend getaway. It is not always easy to make “spontaneous” arrangements for accommodation. This is not a problem when you own your own vacation home. When buying a vacation property, you need to consider your preferred lifestyle. After all, the purpose is to buy a place for you and your family to enjoy. Are you best suited for a condo, house, or townhouse? Do you prefer the beach, an inland island or a golf villa? Do you prefer the beach or the bay for boating and fishing? Do you prefer winter sports?

To help pay for the vacation home, consider renting it out to tourists when you’re not using it. During this period of uncertainty, many people stay in the state and travel closer to home. Homes and condos in resort communities provide all the comforts of home with the option to eat in or out with plenty of activities that don’t cost a lot of money, if anything, like pools and beaches or fishing from docks and piers. There is always the option to mix up some paid activities. Often times for a family, renting a vacation home is cheaper than a couple of hotel rooms when occupancy limits and comfort prohibit a family of five or six from occupying a single room.

For buyers, mortgage rates are cooperating. Rates are slightly higher for investment properties, but if your property qualifies as a second home, you can save a point or two. Often times, a monthly mortgage payment is less than or equal to a week’s rental income during peak season. It would be possible to pay off the mortgage with a twelve-week rental. There is no guarantee that you will have a twelve week rental at peak season prices, and there are other expenses to consider such as utilities, condo or association owed, property taxes, property management, etc. One useful consideration is that there are a growing number of retirees who are choosing to leave the cold climate of the northern states to “overwinter” in the warmer coastal and southern climates. These people add to the support of the vacation home. In other words, it may not cover all of your expenses; however, it will cover most as your property increases in value. And don’t forget about the potentially beneficial income tax deductions.

When calculating your earnings, keep in mind that tax deductions are allowed if you rent your home when you are not using it yourself. While the following are believed to be true, you should consult an accountant or tax professional before having the information, and do not hesitate to call the Internal Revenue Service for clarification.

You can rent your vacation home up to fourteen days a year without having to declare it on your income statement. If you rent more than that, you must declare the income; however, you can deduct many expenses. Most of your association dues cover deductible expenses. You take deductions for all the same things that are deducted for any rental property, insurance, utilities, repairs and improvements. Let’s go over this. Unless the rules change, if your personal use amounts to more than fourteen days a year, or more than 10% of the number of days the house is rented, whichever is longer, the house is considered your residence. If you use it for less than fourteen days, or less than 10% of the time it is offered for rent to third parties, it is considered a rental property.

What about those who buy a vacation home and are considering retirement while still owning it? If one occupies that vacation home for at least two of the five years before retirement, couples could qualify for up to $ 500,000 in tax-free earnings, or $ 250,000 for a single person, on the sale. The first home would have to be sold first, but that home may also qualify if it stays within that five-year period. Check with a tax professional or the IRS before taking the plunge to make sure the rule is still in effect.

No one should buy a vacation rental property on the assumption that it will pay for itself, especially if there is a large mortgage involved. If you are lucky enough to pay in cash or have a very small mortgage, you are more likely to make an annual profit. Ask to see a rental history for the property you are considering. If it hasn’t been used as a rental before, ask your agent to look up comparable property histories. If you can cover your mortgage, taxes, association fees, insurance, utilities, and unexpected repairs, you may make a profit, or at least have a second home that the tenants are paying for, and you can make your profit from the future sale. . If you can’t see a profit from the rental, the difference is worth the investment for the future and your ability to vacation there for as long as you own.

Please note that peak rental season may be the same time that you and your family will want to use the property, usually in the summer. Try to plan your spring or fall vacation when the weather is still good and there are few tourists. If you have school-age children, plan for the first week of summer vacation or the last week before school starts. Most families do not travel the first week after the end of the semester and plan to return home just before school starts to buy clothes and school supplies. Of course, leave July for your tenants. You may also want to wear it on Christmas and if you’re within a short commute time, aim for long weekends that aren’t federal holidays, but maybe staff development days when the kids are away. at school. While many tourist areas, like South Padre Island, see a lot of traffic and visitors on those long federal holiday weekends, there aren’t as many overnight guests as one would think. You are more likely to see local visitors who live close enough to go home at night. If you want to rent on those long weekends to those staying overnight, try offering a special rate, rather than trying to increase the rate. You’ll be closer to attracting those who travel all weekend, and a little rent is better than no rent.

Choosing the right place to invest is essential. Look for a resort location with affordable housing. Find a place with good properties that are affordable for you. Jennifer Openshaw, AOL’s family finance editor, says choose locations with heavy inventory under $ 350,000. The location should be within a few hours of travel time from major cities. There must be an active vacation rental market there, and plenty of activities for the family and certainly for your lifestyle. The city should have room to grow.

While other locations may be more suitable for you, I, of course, think one should look to South Padre Island, TX, where I live and work. If you need to be beach or bay front, and you can use a smaller condo, you can stay under that $ 350,000 mark. For those willing to head back to the other side of Gulf Blvd., which runs along the beachfront skyscrapers, there are many, many condos and townhomes to choose from with easy beach access and priced at $ 100,000 to $ 350,000, depending on your needs. In fact, the entire island is only a mile wide from bay to gulf, so one can easily walk from bay to beach. There are many nice and fairly new 2 and 3 bedroom condos in the $ 180,000 to $ 250,000 range. Just look at our listings to see. In the past, SPI has seen annual increases in property values ​​of up to 20%, and while that may not happen again, we will see more realistic and consistent increases in the future. South Padre Island attracts shoppers from all over the state. It is a 1 hour drive from McAllen, less than an hour from Valley Regional Airport in Harlingen or Brownsville / South Padre Island Airport in Brownsville. Driving time is about 4 hours from San Antonio, about 6 hours from Houston and Austin, and only about 3 hours from Corpus Christi. While there are other coastal resorts closer to some of these cities, South Padre Island has superior beaches, bays, and accommodations, at least in the opinion of many.

Only about five miles of the roughly 35-mile-long island have been populated, and we see potential for growth in the north. New developments are already moving north.

In terms of activities, South Padre Island is a popular place for boating and fishing, fun at the Schlitterbahn water park, bird watching with more than 300 recorded species, windsurfing, kite surfing, and sailing. The island has an entertainment district that offers bayside restaurants and open-air clubs where you can dine informally and listen to all kinds of music. Here you can see fireworks over the bay every Friday night from Memorial Day through Labor Day. For those brave enough, there are bungee jumping and go-karting. For those who want to dine well, there are several restaurants to choose from. And in just thirty minutes, you can visit Mexico for dinner, shopping, and a taste of Mexican culture and crafts. See our page on things to do. Right on the Queen Isabella Memorial Causeway, eighteen holes of golf await the golfer at one of the best golf courses in the Rio Grande Valley. And there are plenty of affordable real estate there too, with a good vacation rental record.