Within a short drive from the Lehigh Valley, there are beautiful homes in the mountains or by the 
shore that are great options for second homes or vacation homes. As tempting as having a weekend (or annual) retreat available is, buyers should do research before financing a second home. Make sure you crunch the numbers, so the purchase doesn't become your worst financial nightmare. Below are several tips that every buyer should review prior to purchasing their dream vacation home.
- Use the equity in your first home or pre-tax funds form an IRA towards the purchase. This can help you avoid higher interest rates and larger down payments.
- Work with an experienced mortgage broker.
- Get several insurance quotes before making an offer.
- Save 2% of the home's value for maintenance costs. If the property will be professionally managed, the management company fee will be 20 percent to 50 percent of the rental income.
- Find a place that can be used as a part-time rental property. Look for a place that you like, but can rent when it is not in use.
- Learn about zoning laws, construction standards, and any other factors that can adversely affect the long-term investment value of the home.
- The home is considered personal-use property by the IRS if it is rented for fewer than 15 days during a year.
- You must report all income to the IRS if it is rented for more than 15 days during the year. You are able to deduct all operating expense such as utilities, repairs, insurance, etc.
- Your profits from the sale of the second home will be taxed as capital gain.
Looking to purchase a second home? Don Wenner can help you locate the vacation home of your dreams. Visit donwenner.com for the best properties in Bethlehem, Easton, or Allentown.
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