August 2010 Vol. 5 No.8

• 4 Questions to Ask Before Investing in a Vacation Home • August's Home Value Improver • About Us

4 Questions to Ask Before Investing in a Vacation Home

At this time of year, we all have vacation on the brain. The only thought that goes through your head when you look out at that beautiful lake sunset, beyond appreciating its beauty, is the desire to appreciate it as an owner instead of a renter. It's a simple fact of human nature that for some of us, vacations mean not only winding down, but wanting more wind down time.

So as you and your flip-flops shuffle out of the local food market, you stoop to pick up a vacation home flyer. Before you know it, you're foregoing a canoe ride to shop for a lakeside cabin. Is this really what you want or have you been taken by the crisp mountain air and the whir of boat engines?

What would buying a vacation home really mean to you and your family? You've heard the happy stories and the not-so-happy stories. Would your family be a happy one? Can you even afford it?

Here are four questions to answer before you take the plunge and invest in a vacation home.

  1. What can you afford?

  2. It's a good thing you can't sign a mortgage while riding a chair lift, because one of my clients rode the lift, looked lovingly at the mountains and decided that convention be damned, she would simply "find a way" to afford that unaffordable ski condo. You have to be realistic. Examine how much you can put down, how much you can pay monthly, and what your maintenance costs will be, as well as property tax.

  3. How will you use it? Rent/Use? Pleasure/Investment?

  4. Vacation homes are seasonal by nature, so you if you plan to rent it for income, be sure to do your research and find out if your renting expectations are realistic. And, don't forget that the most lucrative rental times are probably those times that you want to use the home most too - particularly during school vacations. Maybe you want to rent it out now for your use later.

    If you are looking at it as an investment, think about how long you will likely own it, how your money would do elsewhere, and whether you have the stomach for an investment that will require as much maintenance as your primary home.

  5. What will it mean to your taxes?

  6. You knew Uncle Sam had to come into this equation and make it that much more difficult, didn't you? It turns out that it is better tax-wise to use your vacation home than it is to rent it. You can rent it out sometime and still get tax value, but in order to qualify as a "residence" by the IRS, you need to use it for at least 14 days or 10% of the time it will be rented.

    If you decide that you want to use the home primarily for your own enjoyment, not only will you be able to get the mortgage interest tax deduction, but you can rent it out for two weeks without claiming that income on your taxes.

  7. How will you finance it?

  8. Just like any other home purchase, there are several ways to finance your second home. Banks are typically more stringent when it comes to granting second home loans, since the buyer is stretching himself thinner financially. Many of the second home mortgages ask for more money down, and sometimes the rates are not as good as they are for primary homes.The rate will depend on the use of the home. You will recive lower rates for a primary home and second home that doesn't generate rental. Once the second home generates rental income it becomes an investment property yielding a higher interest rate.

Answering these questions thoughtfully and honestly will put you in the best position to make a smart decision about a vacation home.

August's Home Value Improver

4 Steps to a Better Lawn

Many a good homeowner has struggled with his or her lawn and suffered from lawn envy. Why is your neighbor's lawn so lush and green, while yours seems to invite ugly weeds? Lawn nirvana may be closer than you think.

  1. Cut your lawn frequently with a sharp blade, but not too low.

  2. Keep your lawn about 3 inches high and cut it weekly. The frequency and height will not only encourage the lawn to grow in thicker, but it will discourage those pesky weeds from taking root.

  3. Only mow it when it's dry.

  4. Cutting a wet lawn means you could be squashing the soil and making it difficult for the roots to breathe, which can kill your grass. Be kind to your lawn's roots and they will be kind to you!

  5. Let sleeping clippings lie!

  6. Instead of fumbling with the bag that attaches to the lawn mower, just let the lawn clippings lay back on the grass. They will help fertilize the soil, like any other compost. It works especially well if you mow frequently (see #1).

  7. Don't overwater!

  8. Homeowners often make the mistake of overwatering their lawn. Signs that your lawn needs watering include: Footprints in the lawn remain for a while, the grass gets a blue hue to it, and if you try to press something into the soil, it resists. Give your lawn about an inch of water. Pre-dawn or early morning watering is the best time.

  9. Go easy on the fertilizer.

  10. You really feel like are making a difference when you push around that little green fertilizer. But, you could be doing more harm than good. Instead, test your lawn by taking a sample of the soil and sending it to a local lab or doing a home soil test (if you google "home soil tests" you will find labs and home kits). The lab will tell you specifically what kind of fertilizer you should use.

Westchester Mortgage

What a great summer it's been! I hope you've been able to enjoy some downtime with family and friends and take advantage of the incredible weather that most of us have been having.

Stress levels aren't the only thing that have been lowered during these lazy, hazy days of summer. Interest rates are at historic lows and I've been so pleased to put together some great home buying and refinancing programs for new and existing customers.

And the news gets even better. Unlike other times when interest rates have fallen, the current lower rates should stick around for a while, mainly because economic recovery is going to be a very gradual process. So if you haven't looked at your situation yet, take your time and think about what you want to accomplish with a home purchase or refi.

As always, I would love to talk with you about it and answer any questions you may have. Stay cool and enjoy our final month of summer!

Best regards,
Debbie Siegel
Westchester Mortgage

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