One of the biggest decision Ludlow and Okemo Mountain second-home buyers must decide is whether or not to rent their property when they are not using it. According to the U.S. Census Bureau, one-half of all second-home owners leave their home unoccupied for more than 330 days a year. The question becomes, will your vacation home be a financial burden or a financial cow with the rental income is can generate, thus paying for itself
Renting does have its pros and cons. Some owners don’t like the idea of ‘strangers’ in their home. Others don’t want the hassle of being a landlord, especially a long distance landlord. And then there is the decision to give up the prime vacation season for rental income. The flip side is renting your vacation home provides a stream of easy money.
EscapeHomes.com offers advice and tips when considering a Ludlow and Okemo Mountain vacation home purchase and deciding whether renting out that home is right for you:
Before You Buy
If you already know you will rent your vacation home, consider these questions as you look at properties:
Is there a rental market in the area?
What is the average rent that your neighbors receive?
If you are looking in a development, are there any by-laws which restrict your rental capabilities?
Is this a seasonal area or year-round location?
The answers to these questions will help you select a more lucrative property for your vacation home.
How do you decide when to rent your property and when to use it yourself? Since you are buying primarily for your own fun and enjoyment, you shouldn’t sacrifice this. If the home is in a one-season area, for example, summers at the Maine coast, then giving up that time of year for rental income defeats the purpose of having the home. In this case, you might look for a long-term (9-month) renter for the off-season, among the local population, while you use it in the summer. On the other hand, if you buy a winter ski condo or chalet, it is still highly rentable in the summer time for the mountaineering types. If you buy a property for weekend use, perhaps there are local people who need a Monday-Friday escape option. In short, if you balance your own needs with the market demands, you get both fun and money.
For successful renting, first find out the going rental market rate. Second, determine if you want to market it yourself, or use a rental agent. Self-marketing takes time, but often generates more qualified renters as you are not competing with all the other properties of an agent. Third, be sure to arrange for a property manager. This is different from a rental agency. The manager will take 10 to 20 percent of the rent, and free you up from cleaning, being on call for maintenance (especially important if you live far away), and dealing with the daily needs of the renters.
Make it Personal
By far, the most important factor in success is your personal investment in the process. This means your personal contact with your renters. From a simple welcome note and local maps to a thank-you note and on-going contact, your relationship creates a repeat flow of guests who not only love your second home as much as you do but also pay for the privilege of using it. What could be better?
If you are considering buying a Ludlow or Okemo Mountain vacation home, give us a call, 800-659-1819 #103. We are glad to provide you with the information you need to make a good buying and renting decision.
Think you want to rent out your Ludlow or Okemo vacation home, but don’t want to handle the day-to-day details yourself, we can recommend a reputable Property Manager.
Okemo Mountain Second-home Sellers Pay For Tax Credits
You have probably heard, last week President signed into law the Housing Rescue and Foreclosure Prevention Act. This is the most comprehensive housing bill to be enacted in over a decade. The bill is designed to help more buyers of Okemo Mountain real estate realize their dreams, as well as, boast the struggling housing and mortgage markets.
One of the biggest benefits, and probably one of the most talked about provisions in this legislation, is the $7,500 tax credit to first time home buyers. Tax breaks are all well and good, but they have to be paid for somehow. While first time home buyers are getting a break, second home sellers will be paying for the $15.1 million dollars in tax cuts.
Up until the new legislation went into effect last week, homeowners could exclude up to $250,000 taxable profit on the sale of their home if they’re single taxpayers and $500,000 if married filing joint returns. The catch being, they had to live the in house as their primary residence for two of the five years before it is sold.
Many second home owners took advantage of this by moving into a property that was once a rental or vacation home, live there for two years prior to selling and benefiting from the tax-free profit.
Many homeowners have heard of a “1031 Exchange,” but few understand the basics of what an exchange actually entails. Today I want to cover just a few of the basics of the process, as it can be an invaluable method of homeownership for investment homeowners.US CODE: Title 26, §1031. Exchange of Property Held for Productive Use or Investment
What is a 1031 Exchange?
Put simply, it is the sale of one property in exchange for the purchase another property of similar value without the required payment of capital gains tax, all performed within a specific time frame. An example of when you might use a 1031 Exchange, as opposed to selling a home and purchasing a new one outright: you want to sell your current vacation home and purchase a new, similar one that has a few better features. You have not yet owned your current vacation home for two years, so you are subject to substantial capital gains taxes when you sell it. If you were to use a 1031 Exchange, you could “exchange” your current home for a new one and be relieved of the capital gains requirement. It is this difference between “exchanging” and not simply buying and selling which, in the end, allows you, the taxpayer, to qualify for a deferred gain treatment. In a nutshell: sales are taxable with the IRS and 1031 exchanges are not.
Important Rules of 1031 Exchange
1. The total purchase price of the replacement “like kind” property must be equal to, or greater than the total net sales price of the relinquished, real estate, property.
2. All the equity received from the sale, of the relinquished real estate property, must be used to acquire the replacement, “like kind” property.ISellVermontRealEstate.com. To request more information about 1031 exchange, please click here and select the reports you would like!
1031 Timelines and Rules
Identification period – the seller has exactly 45 days from the sale of the original property to identify other replacement property(s) that he proposes or wishes to buy.
Exchange period – the period during which the seller of the relinquished property must receive the replacement property. This period ends exactly 180 days after the date on which the person transfers the property relinquished or the due date for the person’s tax return for that taxable year in which the transfer of the relinquished property has occurred, whichever situation is earlier.
If you want to learn more about strategies for buying and selling investment properties, or are interested in Okemo Mountain real estate, please call me at 802-353-1983 or visit