Real Estate Information Archive

Blog

Displaying blog entries 1-4 of 4

Desire to Own a Vacation Home Growing

by Allison Simson

Desire to Own a Vacation Home Growing

Posted: 14 Apr 2015 04:00 AM PDT

Desire to Own a Vacation Home Growing | Keeping Current Matters

The National Association of Realtors just released their 2015 Investment and Vacation Home Buyers Survey which revealed that vacation home sales boomed in 2014 to above their most recent peak level in 2006. NAR Chief Economist Lawrence Yun said favorable conditions are driving second-home sales:

“Affluent households have greatly benefited from strong growth in the stock market in recent years, and the steady rise in home prices has likely given them reassurance that real estate remains an attractive long-term investment. Furthermore, last year’s impressive increase also reflects long-term growth in the numbers of baby boomers moving closer to retirement and buying second homes to convert into their primary home in a few years.”

The report shows:

  • Vacation-home sales catapulted to an estimated 1.13 million last year
  • This was the highest amount since NAR began the survey in 2003
  • Vacation sales were up 57.4% from 717,000 in 2013
  • Vacation-home sales accounted for 21 percent of all transactions in 2014, their highest market share since the survey was first conducted

Bottom Line

If you have been considering that waterfront condo in Florida, that ranch in Wyoming or that special getaway you someday will retire to, maybe now is the time to act. Prices are good and mortgage rates are at historic lows. Contact a local real estate professional to help you put your dreams to a plan.

Is now a good time to purchase a second home?

by Allison Simson

Question:  We are considering purchasing a second home in Summit County, CO…we are nervous about the economy, of course, but it has been a dream of ours for a very long time.  Is now a good time?

Answer: Good question!  Yes, there is cause to be nervous about the market and the global economy, AND the things that you love about Summit County and the benefits that owning here will bring to your family are priceless.  Sometimes it helps to take a look at what the rest of the country is doing…. according to Keeping Current Matters and a report from the National Association of Realtors, vacation homes sales were on the  rise in 2012!

“The American desire to own a second home as a vacation home is alive and well!

The National Association of Realtors analysis of U.S. Census Bureau data shows there are 7.9 million vacation homes in the U.S. Their 2013 Investment and Vacation Home Buyers Survey shows vacation home sales improved in 2012.

NAR Chief Economist Lawrence Yun said favorable conditions are driving second-home sales:

“We had a strong stock market recovery, which helps more people in the prime ages for buying vacation homes. Attractively priced recreational property is also a big draw.”

Here are the key findings from the report:

Raw Numbers

  • Vacation-Home sales rose 10.1 percent to 553,000 from 502,000 in 2011
  • Sales accounted for 11% of all transactions last year, unchanged from 2011
  • 35% of vacation homes purchased in 2012 were distressed homes

Buyer Profile

  • The typical vacation-home buyer was 47 years old
  • The median household income was $92,100
  • Buyers plan to own their recreational property for a median of 10 years
  • 29% said they were likely to purchase another vacation home within two years
  • 78% of all second-home buyers said it was a good time to buy (compared with 68% of primary residence buyers)

Reasons for Purchasing

Lifestyle factors remain the primary motivation for vacation-home buyers:

  • 80% want to use the property for vacations or as a family retreat
  • 27% plan to use it as a primary residence in the future
  • 23% plan to rent to others
  • 23% wanted to diversify their investments or saw a good investment opportunity

Location

  • 45% of vacation homes purchased last year were in the South
  • 25% in the West
  • 17% in the Northeast
  • 12% in the Midwest

The vacation home buyer purchased a property that was a median distance of 435 miles from their primary residence

  • 34% were within 100 miles
  • 46% were more than 500 miles

Financing

  • 46% of vacation-home buyers paid cash in 2012

The median down payment was 27%, the same as in 2011

So, while you can never be 100% certain about the real estate market, signs are pointing toward increased consumer confidence in the market. 

For answers to your real estate questions, call Allison at 970-468-6800. Email - [email protected]. Her philosophy is simple, whether buying or selling, she understands that the most important real estate transaction is yours.  Want to know the value of your Summit County property? Visit www.SummitHomeValue.com   

Vacation Property & Second Home 1031 Exchange Guidelines

by Allison Simson

I’ve had lots of questions lately about 1031 tax deferred exchanges and thought it might be time for an update!  This information is from Bankers Escrow Corp and Mary Lou Schwab.   

Great News! The I.R.S. will not challenge whether a vacation property or second home qualifies for a Section 1031 Exchange if certain specified ownership and use requirements are met.  The I.R.S. released Revenue Procedure 2008-16 providing definite guidelines for a safe harbor 1031 exchange. 

To meet the safe harbor requirements, a taxpayer, during the 24 months prior to the sale or after the purchase of a vacation property or second home must:

  1. Rent the property at fair market rent for a minimum of 14 days during each 12 month period of the 24-month period.
  1. Taxpayer’s personal use of the property cannot exceed the greater of 14 days per year or 10% of the days the property is actually rented during each of the two 12-month periods before or after the 1031 exchange.

 

Personal use is defined as:

  • Use by the taxpayer or any other person who has an interest in the vacation or second home property, including a tenant-in-common interest.
  • Use by any individual who uses the property under an arrangement which enables the taxpayer to use some other property.  No trading places allowed!
  • Use by any member of the taxpayer’s family unless the vacation property is rented out as a primary residence at a fair market rent.
  • Use by any other individual if rented for less than fair market rent.

Maintenance days do not count as personal use days. If the taxpayer is engaged in repair, upkeep and annual maintenance on a substantially full time basis for any day, a personal day is not claimed.  The taxpayer must be ready to prove that the actual work was done and this can include overseeing a contractor that is providing the work on the property.

In summary, a taxpayer can take a second home or a vacation property and rent it at fair market value for 14 days per year for two years and then exchange out of it. Remember that personal use must be limited during these two years.  Revenue Ruling 2008-16 provides these guidelines for a safe 1031 exchange.  Taxpayers must also satisfy all other requirements for a like-kind exchange. Always check with your tax advisor before engaging in any 1031 exchange transaction.

Mary Lou Schwab is a CPA and a Certified Exchange Specialist.  She oversees the 1031 division at Bankers Escrow Corp. and can be reached at 800-571-6595 or 303-986-4848.

For answers to your real estate questions, call Allison at 970-468-6800. Email - [email protected]. Her philosophy is simple, whether buying or selling, she understands that the most important real estate transaction is yours.  Want to know the value of your Summit County property? Visit www.SummitHomeValue.com  

Buying second home offers tax break, but at a price

by Allison Simson & Joyce Nenninger

Mortgage-interest deduction can be impacted by multiple refis on primary home

A man thought he would take advantage of the cold, rotten winter weather -- and the perception that real estate is about the same in most of the country-- and make a low-ball offer on a piece of recreational property that one day could become his second home.

His theory was that owners of summer lake cottages felt removed from their sunny getaways at this time of year and those older owners, reluctant to tackle another stretch of off-season maintenance and security, would especially be more likely to consider a cash proposal during the dark days of winter.

"Besides, I could borrow against my primary residence to pay for most of the place and then take a larger deduction on my income tax."

While the off-season may be a terrific time to make an offer on a summer cabin, review your debt history on your primary residence if you plan to borrow against it and deduct the mortgage interest on your federal tax return. Under the mortgage-interest guidelines, taxpayers are limited to the original acquisition debt, plus $100,000.

"For owners who have lived in their home a long time and who might have refinanced more than once, the mortgage-interest limit can easily be exceeded," said Rob Keasal, real estate tax specialist in the accounting firm of Anderson ZurMuehlen & Co. "If you borrow money to make major improvements on your primary residence, that amount is added to your basis. But if you are borrowing to buy another property or pay for college, the limits can be reached in a hurry."

You can deduct the loan fees ("points") paid to buy or improve your main home in the year of purchase. You cannot deduct these fees in the year you refinanced if you refinanced only to obtain a lower interest rate on your loan.

"Tax deductions differ from tax credits," Keasal said. "For example, a mortgage-interest deduction, like a charitable deduction, reduces your taxable income. They are not dollar-for-dollar tax credits that are subtracted from your tax bill. If you have a $1,000-a-month mortgage payment and are in the 15 percent tax bracket, only about $150 a month escapes being taxed in the early months of the loan."

For example, let's say you purchased your primary residence 10 years ago for $100,000 and took out a loan for $80,000 to finance the purchase. Since then, you have paid the loan down to $20,000. The house is now worth $275,000 and you are eyeing a second home. The primary residence definitely has equity to tap, but your mortgage-interest deduction would be limited to the first $120,000 ($20,000 old loan plus $100,000).

According to Keasal, exceeding the limit for the mortgage-interest deduction typically does not spark an Internal Revenue Service audit of an individual's tax return, especially in a tax year when so many changes were adopted in the last few days of the year.

"The IRS is looking to question individual returns where the numbers are really out of whack," Keasal said. "If it has a lot of red flags on one issue -- like the home-office deduction once created -- it often creates a special form for that issue. If the mortgage-interest deduction comes up during the audit, the taxpayer should be prepared with an answer."

The tax rules and deductions for second-home owners who rent out their properties on a short-term basis depend on many factors, including how often you personally use your second home, how many nights or a percentage of the nights you rent out your home, and your personal adjusted gross income (AGI). The details can be found in the IRS Publication 527, Residential Rental Property (including Rental of Vacation Homes).

Real estate -- including second homes -- typically is a sound long-term investment. Yet it's usually not wise to buy property simply for tax reasons, and borrowing against your home to do so could put your mortgage-interest deduction in questionable territory. © Inman News 2008

 

For answers to your real estate questions, call Allison at 970-468-6800 or 1-800-262-8442. Email - [email protected] or visit their web site at www.SummitRealEstate.com. Allison is a long time local in Summit County. Summit Real Estate – The Simson/Nenninger Team is located at the Dillon Ridge Marketplace. Allison’s long-time residency and years of real estate experience can help you make the most of any buying or selling situation. She’s a Certified Residential Specialist (CRS), the highest designation awarded to a Realtor in the residential sales field.  Her philosophy is simple, whether buying or selling, she understands that the most important real estate transaction is yours.  

Displaying blog entries 1-4 of 4

Syndication

Categories

Archives

Share This Page

Contact Information

Photo of Summit Real Estate Real Estate
Summit Real Estate
The Bright Choice
330 Dillon Ridge Way, Suite 10
Dillon CO 80435
970-468-6800
800-262-8442
Fax: 970-468-2195

Allison Simson, Owner/Broker, is a licensed Colorado Real Estate Broker