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Article Written by Jim McKinley
Buying a vacation home can be an exciting experience. However, there are important aspects of rental home ownership to consider before taking the plunge. According to Forbes, if you rent your home out for less than 15 days out of the year, you may not need to report or pay taxes on any income from your vacation home. Here are some basics of buying a rental home.
Keep Insurance Costs Low
Insurance fees are often unexpected costs. If you own your own home and have it insured, check the terms of your insurance to see if any secondary properties might be covered under your current policy. Talk with your insurance company to see what is and isn’t covered.
Sometimes, insurance companies will increase the insurance rate because they view vacation properties as riskier. Doing things like installing a security system can help shave a little money off monthly payments that you might make. Shop around to look for the best rate.
Think About Taxes
Many people don’t understand or think about the tax implications of buying a second home. Knowing the laws now will save you a headache in the future. If you plan on using your vacation home as a second residence for you and your family, then it’s likely that interest on the mortgage and property taxes are tax-deductible.
A basic principle to think of is simply living within your means. The concept is simple: spend less than you’re bringing in. If you follow this advice, you’ll be free to enjoy your vacation and really appreciate your vacation home. This includes saving up for big financial decisions instead of having unrealistic expectations for how much the property will cost.
Is It an Investment Property?
If you anticipate using your vacation home as an investment property where you might rent it out, you should also consider any local or state fees or taxes that might influence this decision. Each state varies in the types of fees, so ask local realtors or even people who rent out their properties in the area what kind of fees that they might have to pay. Look into buying a low-maintenance home or at least tailoring it to be low-maintenance so you can save on repairs.
Each vacation home will require its own set of maintenance. An article in the New York Times recommends that you have a caretaker who can take care of the property. This can be for any type of task: taking care of frozen pipes, inspecting the property for damage after storms, or preparing the house before you visit. Consider visiting the area and talking with individuals who are familiar with the vacation home market to get some good leads for caretaking options.
If the costs seem exorbitant or you are looking for a better way to maintain the house, you could split up the responsibilities and the costs by sharing the property with someone else. Joint ownership is a good option if you know people who are in the market for a similar vacation home option as you.
Be Certain About the Location
It’s hard to determine where to buy. One option that you have before buying is to rent out a property for a short-term period. This can help you clarify whether you might want a winter home near a ski resort, or one that offers more of a beach ambience. It definitely can give you time to be certain about exactly what you want
These are just some basic tips. As you get further into house-hunting, you’ll need to go more in-depth into many the costs and considerations, but this can be your checklist to start with. Take your time with this investment. It’s a big world out there, and you never know what kinds of options are available to you.