The Anna Maria Island Sun Newspaper


Vol. 17 No. 4 - November 9, 2016

REAL ESTATE

Does a second home pay for itself?

 

You know the old expression, "If it's too good to be true, it usually is." It's kind of like that with a second home. It can be a really good investment with a variety of tax benefits or it can be a bottomless pit of stress.

Last month I talked about the good and bad aspects of owning a vacation home with other people. This week let's take a look at the financial benefits of second homes and if it is a good fit for you.

Everyone who owns more than one home has, at some point, considered the possibility of renting one of them to generate income in addition to providing a place for family vacations. Anna Maria Island is of course right in the mix of this with properties being built exclusively for rental purposes, creating discord among residents and all three island governments.

So how does the average homeowner benefit from owning a second home? The obvious thing is the income produced from renting. According to HomeAway.com and VRBO.com two vacation rental websites, the average annual rental income nationally is $28,000, a number that is probably considerably lower then what you will find on Anna Maria. In addition, a HomeAway survey from June said that 70 percent of the respondents said rental income covered more than half of their mortgage payments, and another 54 percent said rental income covered 75 percent or more of their mortgage payments.

Rental income from second homes also are used for regular living expenses, education an, of course, renovations and improvements to the property. Last year, according to the National Association of Realtors, the average purchase price for a vacation property was $192,000 and 61 percent of those were financed with a mortgage. Again, there aren't too many properties on Anna Maria Island below $200,000 so we're totally outside of the national average.

If you're one of the 61 percent who will be financing a second home, rates are usually equal to or within a quarter of a percentage point of current market rates for a primary residence with between a 10 percent to 20 percent down payment. However, if you are purchasing with the intention of renting most of the time, the lender would consider it an investment property involving tighter qualifications. For example, higher credit scores and a high down payment of approximately 25 percent would be typical. That said, qualifying for a mortgage on an investment property could be easier since lenders will include the proceeds from the rental income as part of your income calculations.

Also, if your property is established as an investment property, there are legal IRS benefits that can be taken advantage of, but will limit the amount of time for personal use. All expenses related to the property can be written off, including mortgage interest, property taxes and possibly some of the costs of obtaining the mortgage similar to a primary residence. In addition, any repairs, maintenance, cleaning, utilities and some of the realtor fees can be expensed against the property. Remember that investment properties are essentially a business, and there also will be depreciation involved, which will be a consideration when the property is sold. Naturally, a sit down with a tax expert familiar with investment property is critical before proceeding.

Finally, you have to ask yourself do you have the stomach to be a landlord, especially if it involves seasonal rentals that turn over quickly and can create problems on a weekly basis. Hiring a property management company can certainly take the pain out of frequent intrusions into your daily life, but it will also cut into your profits. Proceed with caution. It may be too good to be true.

Real Estate Transactions
Real estate transfers of June 2016

Sponsored by Alan Galletto Island Real Estate

Sold Date | List Price | Sold Price | Address | Provision | Property Style

Anna Maria

16-07-11 625,000 525,000 122 Oak Ave 1176 3 Br/2 Ba SFR
16-07-08 745,000 689,000 405 Spring Ave 1696 4 Br/3 Ba SFR
16-07-01 899,000 850,000 302 Tarpon St 1878 3 Br/2 Ba SFR
16-07-05 1,099,000 919,000 525 Kumquat Dr 2288 3 Br/2 Ba SFR
16-07-22 1,200,000 1,100,000 116 Peppertree Ln 1996 3 Br/2.5 Ba SFR
16-07-14 1,250,000 1,153,500 229 Chilson Ave 1597 3 Br/3 Ba SFR
16-07-21 1,250,000 1,170,000 238 Lakeview Dr 2281 3 Br/2 Ba SFR
16-07-25 1,745,000 1,600,000 909 N Shore Dr 1868 3 Br/3 Ba SFR
16-07-25 3,500,000 3,300,000 825 N Shore Dr 3486 3 Br/4.5 Ba SFR
16-07-21 620,000 580,000 218 Palmetto Ave 1648 52x100 Duplex
16-07-15 399,000 350,000 710 N Shore Dr 60x85 Vac.
16-07-07 495,000 470,000 401 S Bay Blvd 76x105 Vac

Bradenton Beach

16-07-01 1,495,000 1,495,000 106 4th St S 3000 6 Br/5 Ba SFR
16-07-01 379,900 349,000 1301 Bay Dr N #5a 1079 2 Br/2 Ba Condo
16-07-28 610,000 585,000 1417 Gulf Dr N #1417 1524 3 Br/2.5 Ba Condo

Cortez

16-07-26 1,800,000 1,720,000 12614 Baypointe Ter 4677 3 Br/3.5 Ba SFR
16-07-12 123,500 107,500 12334 Baypointe Ter 110 x 151 Apx Vac.

Holmes Beach

16-07-11 489,000 475,000 406 Bay Palms Dr 1332 2 Br/2 Ba SFR
16-07-06 549,000 490,000 308 56th St 1080 2 Br/1 Ba SFR
16-07-12 579,000 575,000 208 Haverkos Ct 2181 65x98 3 Br/2.5 Ba SFR
16-07-18 619,000 620,000 5802 Imperiore Ave 1020 2 Br/2 Ba SFR
16-07-20 650,000 650,000 304 60th St #B 1150 3 Br/2 Ba SFR
16-07-15 849,000 790,000 206 67th St 2139 4 Br/3 Ba SFR
16-07-27 999,000 975,000 307 74th St 1676 3 Br/3.5 Ba SFR
16-07-11 1,299,000 1,185,000 671 Key Royale Dr 2885 221x78 3 Br/2.5 Ba SFR
16-07-19 2,190000 1,800,000 512 59th St 4544 6 Br/4.5 Ba SFR
16-07-11 2,399000 2,100,000 625 Key Royale Dr 3118 4 Br/3.5 Ba SFR
16-07-05 375,000 350,000 3215 Gulf Dr #3215 672 1 Br/1.5 Ba Condo
16-07-01 360,000 360,000 600 Manatee Ave #205 1187 2 Br/2 Ba Condo
16-07-01 389,000 375,000 3402 Gulf Dr #3 359 2 Br/2 Ba Condo
16-07-18 415,000 392,000 5806 Gulf Dr #204 1078 2 Br/2 Ba Condo
16-07-15 499,900 485,000 6006 Gulf Dr #111 1154 2 Br/2 Ba Condo
16-07-11 395,000 367,500 3009 Avenue E 751 2 Br/1 Ba Villa
16-07-26 469,000 425,000 5613 Guava St #A&B 1580 57x105 Duplex

Source: Mid Florida Multiple Listing Service


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