Attractive Vacation Like Home
In Eugene real estate, there are happy words (“sold!”) and there are troubling words (“default”). Because of the associations they conjure up, some phrases just automatically make us happier. Two of the leaders in the positive category are the magical words, ‘vacation like homes.’ All by themselves, they can trigger a smile. Why not? “Home” is comforting; “vacation” is fun. Put them together in “vacation-like home” and you’ve got a double positive. It’s a real estate equivalent of Jimmy Buffett’s Cheeseburger in Paradise.
As the economy recovers, some American families are doing more than just smiling at the idea. The Wall Street Journal says that vacation like home sales jumped more than 50% in 2014—up from 717,000 the year before. Quicken Loans reports a jump “in both the number and dollar volume of second home mortgage applications.”
To a Eugene Oregon homeowner with sufficient wherewithal, there are some practical, real-life incentives for moving the idea from daydream to the ‘to do’ list. The primary motivation is what comes first to mind. Just as a vacation is a welcome respite from the day-to-day, a vacation home needs to qualify as a destination that is pleasurable in itself. Where that could be different for everyone, but whether it be the beach, desert, mountain, lake, cultural metropolis or outdoor sporting mecca, any college town homeowner’s vacation like home should be a haven inherently suited to relieving the stress of the workaday world. Although it would seem to be properly classified as a pure luxury expense, vacation homes can be more financially sensible than that.
The Kiplinger website has a number of observations for vacation home buyers. It finds that some mortgage interest rates on second homes have lowered to first-home rates. Another alternative is the “favorite source” for all-cash purchases: a home equity line of credit. According to Kiplinger, “Mortgage interest on a second home is deductible on as much a $1 million in principal for both homes combined.” If lenders calculate eligibility via the Fannie Mae and Freddie Mac guidelines, a borrower’s total debt payments should not exceed 36% of gross income…but if the second home is to be rented, that income can be part of the calculation.
Which brings up some other possibilities. A vacation like home can not only cut down on vacation expenses (hotel and restaurant prices are rising, after all); if rented out some of the time, it can contribute offsets to its cost. To take advantage of IRS rules regarding personal versus rental classification, you should consult a CPA. Since a quarter of vacation homes are rented out at least some of the year, it’s a tactic that deserves investigation.
Perhaps the advantage that’s talked about most for second home buyers is the contribution it can make toward retirement. If a retiree ultimately converts a vacation home as their principal residence, profits from the former home can make a handsome contribution to the retirement nest egg. And, if, by retirement time that vacation like home has been paid for in whole, it can make for an even more pleasing financial picture.
For a Eugene Oregon area resident with sufficient resources, purchasing a vacation like home can be a practical as well as emotionally sustaining venture. If it sounds like an idea worth investigating further, talk it over with your financial advisor—and one of Key Realty Group Inc. outstanding Eugene Realtors will be standing by to help with any and all real estate considerations!