| With the uncertainty of the stock market, people are | | | | use it for fewer than fourteen days, or less than |
| looking for alternative ways to invest. Real Estate | | | | 10% of the time it is offered for rent to others, it is |
| has always been a good place to invest for the long | | | | considered a rental property. |
| term. It is true that real estate values are down at | | | | What about those who buy a vacation home and are |
| this time; however, historically, the real estate market | | | | considering retiring while still owning it? If one |
| has always rebounded. During the past few years we | | | | occupies that vacation home for at least two of the |
| have seen an extraordinary increase in market value, | | | | five years before retiring, couples could qualify for up |
| and investors have been able to purchase and "flip" | | | | to $500,000 of tax-free profit or $250,000 for a |
| the property quickly for a profit. Those days have | | | | single person, on the sale. The first home would have |
| passed; however, for the buyer who is willing to hold | | | | to be sold first, but that home can also qualify if you |
| the property for the long term, a good profit can be | | | | stay within that five year period. Check with a tax |
| made. | | | | professional or the IRS before taking the step to be |
| There is much news today regarding the decline of | | | | sure that rule is still in place. |
| the housing market and a large number of | | | | No one should purchase a vacation rental property on |
| foreclosures. One should not expect that to be the | | | | the assumption that it will pay for itself, especially if |
| case in many resort areas. Many resort areas have | | | | there is a large mortgage involved. If you are |
| seen relatively few foreclosures and almost no | | | | fortunate to pay cash, or have a very small |
| instances of subprime lending. You are not likely to | | | | mortgage, you are more likely see an annual profit. |
| find a depressed market on beachfront condos, but | | | | Ask to see a rental history of the property you are |
| for those willing to walk a half block to the beach | | | | considering. If it has not been used as a rental |
| prices may be significantly lower than they were just | | | | before, ask your agent to find histories on |
| a year ago. This is not so much because of the | | | | comparable properties. If you can cover your |
| economic crisis, but because of over-building which | | | | mortgage, taxes, association fees, insurance, utilities, |
| created too much supply for the demand. As the | | | | and unexpected repairs, you may see a profit, or at |
| existing inventory of real estate depletes we should | | | | least will have a second home that renters are paying |
| see a smooth rebound in property values. Values | | | | for, and you can take your profit from the future |
| could drop even more, but not likely as construction | | | | sale. If you can't see a profit from the rental, is the |
| has slowed and the surplus inventory has declined. | | | | difference worth the investment for the future and |
| For the buyer intending to hold the property as a | | | | your ability to vacation there for the time that you |
| long term investment in a family vacation home or as | | | | own it. |
| a retirement home, there should eventually be a | | | | Keep in mind that the high rental season may be the |
| return on the investment. | | | | same time that you and your family will want to use |
| Most families plan their vacations well in advance; | | | | the property, usually summer. Try to plan your |
| however many frequently just want to take | | | | vacation in spring or fall when the weather is still |
| advantage of a weekend break. It isn't always easy | | | | great, and there are few tourists. If you have school |
| to make "spur of the moment" arrangements for | | | | aged children, plan for the first week of summer |
| accommodations. This is not an issue when you own | | | | vacation or the last week before school starts. Most |
| your own vacation home. When buying a vacation | | | | families don't travel the first week after the end of |
| property, you should consider your preferred lifestyle. | | | | the semester and plan to be back home just before |
| After all, the purpose is to purchase a place for you | | | | school starts to purchase school clothes and supplies. |
| and your family to enjoy. Are you best suited for a | | | | By all means, leave July for your renters. You may |
| condo, house, or townhouse? Do you prefer | | | | also wish to use it at Christmas and if you are within |
| beachfront, interior island, or a golf villa? Do you | | | | a short travel time, target those long weekends |
| prefer the beach or bayside for boating and fishing. | | | | which are not federal holidays, but perhaps teacher |
| Do you prefer winter sports? | | | | staff development days when the children are out of |
| In order to help pay for the vacation home, consider | | | | school. While many resort areas, such as South Padre |
| renting it to tourists when not using it yourselves. | | | | Island, see a lot of traffic and visitors on those long |
| During this period of uncertainty, many people are | | | | federal holiday weekends, there aren't as many |
| staying state-side and traveling closer to home. | | | | overnight guests as one would think. One is more |
| Houses and condos in resort communities provide all | | | | likely to see local visitors who live close enough to go |
| the comforts of home with the option of eating in or | | | | home in the evenings. If you want to rent on those |
| dining out with plenty of activities that don't cost | | | | long weekends to those who do stay overnight, try |
| much, if any, money, such as pools and beaches or | | | | offering a special rate, rather than trying to hike up |
| fishing from docks and piers. There is always the | | | | the rate. You will come closer to attracting those |
| option of some paid-for activities mixed in. | | | | who are traveling for the entire weekend, and some |
| Frequently, for a family, vacation home rental is | | | | rent is better than no rent. |
| cheaper than a couple of hotel rooms when | | | | Choosing the right place to invest is crucial. Look for |
| occupancy limits and comfort prohibit a family of five | | | | a resort location with affordable homes. Find a place |
| or six from occupying a single room. | | | | with good properties that are affordable for you. |
| For purchasers, mortgage rates are cooperating. | | | | Jennifer Openshaw, AOL Family Financial Editor says |
| Rates are slightly higher for investment properties, | | | | to choose locations with plenty of inventory under |
| but if your property qualifies as a second home, you | | | | $350,000. The location should be within a few hours |
| can save a point or two. Frequently a monthly | | | | of travel time from major cities. There must be an |
| mortgage payment is less than or equal to one week | | | | active vacation rental market there, and plenty of |
| of rental income during a peak season. It would be | | | | activities for the family, and for sure for your |
| possible to pay the mortgage with twelve weeks | | | | lifestyle. The town should have room to grow. |
| rental. There is no guarantee that you will have | | | | While other places may be more suited for you, I, of |
| twelve weeks rental at high season prices, and there | | | | course believe one should look at South Padre Island, |
| are other expenses to consider such as utilities, | | | | TX where I live and work. If you need to be |
| condominium or association dues, property taxes, | | | | beachfront or bayfront, and can use a smaller |
| property management, etc. One helpful consideration | | | | condominium, you can stay under that $350,000 |
| is that there are a growing number of retirees who | | | | mark. For those willing to step back to the other side |
| choose to leave the cold weather of the northern | | | | of Gulf Blvd., which runs along the beachfront |
| states to "winter" in the warmer coastal and | | | | high-rises, there are many, many condominiums and |
| southern climate. These people add to the support of | | | | townhouses to choose from with easy beach access |
| the vacation home. In other words, you might not | | | | and priced from $100,000 to $350,000, depending on |
| cover all of your expenses; however, you will cover | | | | your needs. For that matter, the entire island is only |
| most while your property grows in value. And don't | | | | ½ mile wide from Bay to Gulf, so one can |
| forget about the possible and beneficial income tax | | | | easily walk from bay to beach. There are plenty of |
| deductions. | | | | nice and fairly new 2 and 3 bedroom condominiums in |
| When figuring your profits, keep in mind that there | | | | the $180,000 to $250,000 range. Just look at our |
| are tax deductions allowed by renting out your home | | | | listings to see. In the past, SPI has seen annual |
| when not using it yourself. While the following is | | | | increases in property values to be as much as 20% , |
| believed to be true, you should consult an accountant | | | | and while that may not happen again, we will see |
| or tax professional before counting on the | | | | more realistic, steady increases in the future. |
| information and don't hesitate to phone the Internal | | | | South Padre Island attracts buyers from the entire |
| Revenue Service to get clarification. | | | | state. It is located 1½ hours by car from |
| You can rent your vacation home for up to fourteen | | | | McAllen, less than an hour from Valley Regional |
| days a year without having to declare it on your | | | | Airport in Harlingen or Brownsville/South Padre Island |
| income tax return. If you rent it out more than that, | | | | Airport in Brownsville. Driving time is about 4½ |
| you must declare the income; however, you can | | | | hours from San Antonio, about 6 hours from Houston |
| deduct many expenses. Most of your association | | | | and Austin, and only about 3 hours from Corpus |
| dues cover deductible expenses. You take deductions | | | | Christi. While there are other coastal resorts closer to |
| for all of the same things that one deducts for any | | | | some of these cities, South Padre Island sports |
| rental property, insurance, utilities, repairs and | | | | superior beaches, bay, and accommodations, at least |
| improvements. Let's review this. Unless the rules | | | | in the opinion of many. |
| change, if your own personal use amounts to more | | | | Only about five miles of the approximately thirty-five |
| than fourteen days a year, or more than 10% of the | | | | mile long island have been populated, and we see |
| number of days the home is rented out, whichever is | | | | potential for growth to the north. Already new |
| longer, the house is considered your residence. If you | | | | developments are pushing north. |