Investing in a vacation home in South Florida can be a wise decision, especially if you plan on renting it out when the home is not in use (as 25% of vacation homeowners do). South Florida remains one of the best areas for vacation homes with its beautiful weather and high tourism throughout the year.
Try to view your vacation home purchase an investment
Viewing your vacation home purchase as an investment is the right approach, even if you plan on utilizing it mostly for yourself. Try to estimate what your expenses will be and your potential rental income, and choose a location where housing prices are expected to rise.
Consider meeting with a South Florida residential real estate attorney to discuss how to properly turn your vacation home into a rental, tax implications, and the things you may need to do in order to make it as profitable as possible.
Think about how much you plan on using your vacation home
If you plan on staying in your vacation home for a maximum of 14 days during the year, or 10% of the number of days the home is rented, (whichever is greater) you can treat your vacation home as a business for tax purposes and deduct a wide range of different expenses and losses. Also, maintenance days do not count against your personal days.
If you stay in the home more than 14 days or 10% of the time it is rented, whichever is greater, it is considered as a personal residence and you won’t be able to deduct losses, but you can still deduct certain rental expenses.
Also, if you rent your home for more than 14 days during the year, you will have to report your income to the IRS. If you rent your home for 14 days or less you don’t have to report the income, no matter how much you make during that time period. In any case, it is highly recommended to meet with an accountant as well as a residential real estate lawyer in South Florida to discuss the tax implications of your purchase.
Try to estimate your potential rental income
A South Florida residential real estate attorney and other real estate experts can help you estimate your potential rental income and your expected return. It is also a great idea to consult with vacation rental companies in South Florida to determine how many weeks during the year that you can expect your home to be booked and learn more about the local market.
Even in some of the most popular vacation spots in South Florida you can’t expect your rental to be full every week of the year. However, you can still earn a nice income during the busy tourist seasons while enjoying your vacation home for yourself whenever you want.
Mark Schecter has assisted many clients with second home purchases and can answer any questions you may have about purchasing a vacation home in South Florida. For more information, contact Schecter Law today at (954) 779-7009.