The Baltimore Sun has this “An effort to restrict vacation home rentals of single-family homes in Ocean City that went nowhere last summer is back on the agenda in a new form.
“The vacation town is debating the creation of a new zoning district, where rentals of anything less than a year would be banned. If the zone is created, neighborhoods could petition for the designation.
“Backers say the proposal is designed to offer relief to the town’s few single-family neighborhoods, where year-round residents have clustered, away from the summer crowds. But opponents fear that other neighborhoods would seek the new zoning.”
Vacation homes are a hot topic. Last year 40 percent of all homes bought in America were vacation homes and investment properties. That’s more than 3,000,000 homes per year!”
Vacation homes are finding buyers. According to NAR, sales of vacation homes in the U.S. boomed last year, even rising above their most recent peak in 2006, just before the housing crash. More remarkable is that in 2006, lending standards were very lax. Now, they are strict — yet sales have surpassed the 2006 high.
Zero Hedge commenting on sales of luxury homes wrote “…vacation home sales soared nearly 60% last year on top of 30% the year before that.” They mention that one in five home sales in the US is now a vacation home.
More and more, vacation sales are influenced by boomers moving closer to retirement and buying second homes to convert into their primary home in a few years. The rising stock market has enriched some and is a further influence toward the vacation home market.
Buyers buy vacation homes putting down 20% to 50%. Some use home equity loans to buy their homes. Lenders will loan money for purchases, but will expect you to stay within the debt-to-income limits dictated by Fannie Mae and Freddie Mac. Your total debt payments, including all mortgages, can’t exceed 36% of your gross income. The good news is that if you plan to rent the place, you can count some of that assumed rent as income when calculating the ratio.
Kiplinger tells us “For tax purposes, vacation homes are subject to what’s called the 14-day or 10% rule. You can rent your place for up to 14 days a year and pocket the rental income without having to declare it on your tax return. If you rent out the house for more than 14 days a year, you are considered a landlord by the Internal Revenue Service and you must report the income. But you also qualify to deduct certain expenses.
The way you divide the time between personal use and rental use of the place determines your status in the eyes of the IRS. If your own personal use amounts to more than 14 days a year, or more than 10% of the number of days the home is rented out, whichever is longer, the house is considered your personal residence. If you use it for fewer than 14 days (or less than 10 percent of the time it is rented to others), it’s considered a rental property. If you are planning on renting your vacation home, it’s best to seek competent tax advice from your tax accountant or CPA.
Trusted Homebuyers being one of the biggest investors in Maryland, we make money by volume not on any one property. Which allows us to pay the absolute most for properties. Trusted Homebuyers is one of the leaders of a nationwide group of thousands of investors who are helping tens of thousands of homeowners every year. We may not be the “traditional” route, but the reason so many choose to work with us is because we CAN help and we can do it quickly, which creates a win-win situation and allows you to sell quickly with no repairs.
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