Keep it or Rent it?

We’re back, with our special ‘Second Homes,’ all about you – and that wonderful getaway you’ve dreamed about owning.

We’re going to close out this hour of the show with a look at one of the most important questions you can ask, about your second home.

Do we rent it out? Or not?


It’s is a big question. Because what you decide will have a big impact on your money, your taxes, and your lifestyle, at that second home.

Now first of all, yes. Renting it out can bring you income. That can help pay the mortgage. Or, maybe the whole mortgage. So there you are, with your very own vacation home, and other people are paying the monthly mortgage. That’s pretty great.

Having a place at the beach, or in the mountains, or on a lake – or even a condo in the big city….anywhere people would come for a vacation….you’ll probably be able to rent it out, for good money. Talk to your REALTOR® about that – they’ll know the rental market, in the location you’re interested in.

But there are considerations….and mostly they have to do, with time.

For one thing, if you rent out your second home, the IRS has set limits on how long YOU can be there! Check with your accountant on this. But if it’s a bona fide investment property, the rules say you can live there two weeks a year. Is that enough for you?

Plus that gets complicated.

If it’s an investment, and you rent it out, say, for the whole year – then you’d NEVER be able to use it. OK? But say you rent it out six months…..according to the rules, you probably coul;l;d not then live there the other six months….more like 2 weeks! Or else you could face a huge tax hit. gain, check with your accountant on that.

Next – if your place is covered by an HOA or a Condo association – better check the rules on renting. Some allow whatever you want – some don’t. Some associations require any rentals be at least one year…..not a couple of weeks. So, make sure you know – before you buy.

And speaking of short term rentals – many homeowners are interested in making their second home into a vacation destination, using Airbnb, or VRBO. That’s great, and it can mean great income, too….but check the rules! Many city condos forbid that – period. Because they don’t want a residential building turning into a hotel. So again – check that very carefully.

One last thing – make sure you carry appropriate insurance on the place….especially places on the water of with pools. You might want to make sure you have big liability coverage, just to be on the safe side.

But again, assuming you do all the research, and it works for you, renting out your second home could provide a nice income stream, every year.

Now, let’s also look at keeping it all to yourself.

The tax part is easier. It’s a second home, that’s it. You can still deduct the mortgage interest and the property taxes. There’s no income, so no tax hit there.

Also, you can go there anytime you want. Spend a day, spend a month – it’s up to you, and there’s no IRS rule saying you need to leave.

And one more thing – you can really make the place all about you. The furniture, the family photos, the pots and pans, even the big screen TV……only you and your family will be there, no renters. So you can do it up, anyway you want.

Got really expensive rods and reels? Leave ‘em. No one but you is going to be using them. Got streaming devices that allow you to rent or buy movies? Or new music? Leave ‘em. No one’s going to be racking up your iTunes bill.

It’s a very different experience. Because it really is your home. Not an investment.

But – which is right for you? Either way – whether you rent it out or not – you have one thing in common – it’s yours. You now own another piece of real estate. And as values rise, and the mortgage gets paid down – your household wealth stands a good chance of increasing. Whether you rent, or keep it for yourself.

So talk it over with your family. Your REALTOR® and your accountant. And think it through. To make sure the second home you buy – is just right for you.

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