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Well-to-do baby boomers are planning ahead and
purchasing vacation properties that they intend to relocate to
later. This is a great idea, as the number of baby boomers looking
to retire in the next 30 years -an estimated 77 million- will increase the
competition for homes in prime locales and drive prices even higher than
they already are.
Because of heavy demand for rentals, owning
a second home is even more affordable than previously thought. Also
making such purchases more affordable are recent changes to the tax
laws. For example, married couples pay no capital gains on their
primary residence, up to $500,000 of profit from the sale, making it
easier for empty nesters to downsize to smaller homes and use the profit
to pay for a vacation property.
Experts say that Buyers should avoid
inflated prices at the more popular vacation spots like Pebble Beach,
Aspen, and Nantucket. Rather, they should seek out areas where only
limited development is permitted - lake property for example - (There's
limited development due to the State Parks and Wildlife Preserve
areas).
Of course, buyers of second/retirement homes as with any purchase, you should find an area where you would like
to live before making a purchase.
If the second homeowner is planning to rely
on rental income to pay for the mortgage, most lenders will want a 25%
down payment, and those borrowers will typically pay a percentage point
higher on their loan. As for taxes, those second home owners who
personally use the property less than two weeks a year, or 10 percent of
the days the house is rented, can take advantage of more deductions than
owners who personally use the home more often. On the other hand, if
the owner rents our the property for less than two weeks a year, that
income does not have to be reported.
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