In these interesting economic times, everyone needs to find some creative ways to make it through. Many who bought vacation homes back in 2006 or before have seen the stock market take a nose dive and may have taken a hit on the value of their personal residence. As compelling a region as Smith Mountain Lake it, selling the second home here to eliminate the mortgage, insurance, and utility costs may seem to be the best thing to do right now.
This time is not the best time to sell a second home. Nationwide, demand has dropped - by 31% since 2007, per National Association of Realtor figures; last year, median prices dropped by 23%. Ideally, if you are a second homeowner, you should hold on to your property if at all possible, especially if having the home is part of a long term strategy to relocate or for retirement living.
Do you want to keep the property you have some options, aside from refinancing or modifying the loan?
Rent out the property. Unless you bought the home to serve as a weekend refuge, you may have long periods where you do not use it. Renting the property offers tax write-offs for maintenance and repairs. In many resort areas, home rent by the week; even if you want to be able to use the home for yourself and your family for a week here or there, you can juggle your own plans with rental availability.
If your property is located in area that holds one-time annual or periodic events (think the Olympics, a major sports event, a major film festival), you can rent the place out for the event for a tidy sum. According to IRS regulations, you do not have to report the money you receive for rent if the time period is under 45 days.
Real estate agents can do a great job of marketing, but many would-be landlords are doing it themselves on the Internet, often using such sites as Vacation Rentals by Owner (VRBO.com) or Facebook.
Donate to charity for a tax write-off. Many charities and non-profits love to raffle or auction off a week in a great vacation spot. You receive no money for the rental though you can negotiate for cleaning expenses, but you may benefit from the tax write-off based on the fair market value. There's even help to match you up with interested charities at VacationHomesForCharity.org. (Make sure to talk to your tax advisor before deducting anything.)
If you retired to a vacation area in anticipation that your investment portfolio would carry you through, you can donate the home to charity but retain a life estate. If properly set up by your tax advisor, the net result is that you would gain a large tax deduction to offset income.
Appeal your high tax rate. Like elsewhere, vacation home taxes often remain the same even when property values have gone down. Appealing the taxes can be costly, as there may be legal costs involved, but the savings can be substantial if area home prices have dropped. A successful appeal is based on the appraisal being wrong, due to incorrect valuation when compared to like properties or misallocations as to size or the home or number of rooms.
Find a partner. If you sell an interest in the home, you can relieve yourself of some of the burden of maintenance and repair. Often a lawyer will set up a limited liability corporation (LLC) so responsibilities and expenses are shared.
If you decide it is time to sell your Virginia home, homes do move pretty well as long as they are priced right. Vicki Millehan will help you position your home to sell. She can also show you the best homes in Smith Mountain Lake. Check out Vickislakehomes.com.
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