NEW YORK, March 5, 2013 /PRNewswire-iReach/ -- If you're lucky enough to be in the market for a vacation home, congratulations! Having a place of your own where you can rest and unwind is a major bonus. But first, you've got to actually buy it! The real estate experts at Realtypin.com have given out tons of advice for people buying their primary homes. Now, it's time to dish out some advice to people looking to buy a vacation home. Before you sign on the dotted line, you've got to consider these 3 things:
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1. How long you're going to keep it
Vacation homes are found in great locations (typically in the South and the West). However, those great locations also come with some risk. Because prices in these markets tend to rise higher than most other spots, they also tend to fall faster during tough economic times. A prime example of this is what happened in Florida during the housing bubble boom and eventual burst. Prices in the Sunshine State hit astronomical levels, but when the economy crashed, so did the home values. So, while the U.S. economy is still on shaky ground, make sure you're going to hang onto your vacation home for awhile. The last thing you want is for something to go wrong with the economy and to watch your vacation home's value plummet!
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2. How you're going to pay for it
You've probably heard that lenders have stricter guidelines these days, but what you may not know is that they're even tougher on people who are trying to buy second homes. In their minds, your vacation home in paradise only represents more debt – and, thus, a bigger chance for you to default and leave them holding the bag. So, be prepared to go through a very tough qualifying process. In fact, the qualifying process is so tough that nearly 50% of vacation home buyers used cash for their purchases in 2011! You may want to consider doing the same.
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3. How you're going to deal with your taxes
If you spend most of the year in a state that's got state income taxes – then spend a few months at your vacation home in a state with no state income taxes – you'll need to figure out how you're going to divide everything up on your tax return. (Even if you don't work, things like Social Security benefits still technically count as income, so you'll have to figure out the tax ramifications) Talk to a tax professional before you start declaring things to Uncle Sam. That way, you'll be able to vacation in peace!
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