The Laguna Coast area offers many opportunities for a Dream Vacation Home.  Purchasing a second home for vacationing and/or retirement purposes can be a wise investment when approached properly and with solid knowledge of the current marketplace. It can also be a very lucrative investment, offering considerable income if you choose to rent while it is unoccupied.  Tenant/occupants can provide security in addition to a substantial return on investment during times that your vacation beach house would otherwise sit vacant.  Here are five tips for determining whether buying that second home is the best decision.

1. Determine if Now is the Right Time to Buy

Current market conditions, affordability of homes, personal budget and how the property will be used should be evaluated to decide if buying is a smart move right now. Even if the home’s primary use will be for personal vacationing, keeping in mind current values and appreciation rates in the community is important. With smart choices, a second home can be an invaluable addition to one’s financial portfolio.

2. Know What is Desirable in Vacation Homes

Of course, the buyer’s vision of a dream vacation home will be definitive. However, if the plan is to utilize the property as an investment to rent to other vacationers, it’s essential to consider the vacation home’s desirability to travelers. This means considering the property’s location and accessibility first and foremost beyond its convenience to your locale. Coastal towns like Laguna Beach and Dana Point have a very low vacancy rate due to high demand.  Talk to a local realtor like Laguna Coast Real Estate, who specializes in vacation home investments.  Rent in your desired location to discover the community’s vibe both on and off season.  Look for amenities that would entice vacationers to visit – beaches, shopping, restaurants and festivals are popular things that draw couples and families to a given area.  Ocean views and upscale furnishings are in high demand along coastal areas like Laguna Beach.

Most importantly, one must fully understand the rules of renting vacation homes, and this will take a bit of research. Certain communities limit the number days or weeks properties can be rented. While this may sound like a hindrance, consider that high rental turnover can be a nuisance when the time comes for you to vacation or take up residence there permanently. Work with a reputable, local real estate professional who is familiar with the area to help decide what homes are the best investments.

3. Understand Seller Negotiations and Financing Options

Those buying a second home might encounter sellers trying to sell their second home. Many simply want to move on while others are finding themselves financial overextended, meaning they are more likely to be open to price negotiations. In fact, some sellers may be amenable to certain terms such as carrying the second mortgage for buyers for a few years as a perk.

Concerning mortgage options for vacation homes, it’s advisable to have a real estate expert on board for guidance. However, here are a few things to keep in mind when looking for second home financing options.

• Use a local broker and lender near the area of the property.
• Be prepared to face stricter qualifying guidelines and higher interest rates for vacation homes.
• Ensure that credit scores of investing parties are solid, and get pre-qualified for a loan.
• Cash-out refinancing or home equity lines of credit are popular options, as is getting a conventional loan on second homes.
• It may be necessary to pay 25 percent down if the home will be used as a vacation rental.

4. Know the Tax Laws for Vacation Homes

Second homes have various tax implications that are based upon whether or not the property will be rented at any point and the buyer’s current financial situation. If ensuring a good return on the investment is vital, keep these tips in mind concerning tax implication on vacation homes.

• Factor in property taxes, homeowner association fees, home maintenance and upkeep, housekeeping (if renting), utilities and other expenses before investing.
• Consult with a tax professional about ways to defer or reduce capital gains on the home sale.
• Often, second homes qualify owners for certain deductions such as mortgage interest, and those being rented may be eligible for additional tax breaks.
• If the home is rented for fifteen days or more annually, income must be reported to the IRS minus acceptable operating expenses.

5. Consider Alternative Ownership Options with Caution

Experts advise vacation home buyers to enter situations such as fractional ownership, timeshares, condo hotels and even townhouses with caution. Properties such as these may have strict regulations and cooperative-ownership practices that could ultimately be burdensome over time—especially in resale situations. Additionally, financing tends to be far easier to obtain for single-family homes.

Laguna Coast Real Estate Professionals

If you are interested in vacation properties in Laguna Beach, CA or anywhere along the Laguna Coast, contact the real estate professionals at Laguna Coast Real Estate who are seasoned experts in this area.  Knowledgeable about the most desirable communities, types of homes, decor and local services – they can guide you in making an informed decision about your dream vacation home along the Southern California Coast.

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