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We've all thought about it while laying on the beach or inhaling the fresh mountain air: Why don't we buy a vacation home? Owning a vacation home can be a good decision if you buy smart. . Great Reasons To Buy A Vacation Home They provide another investment that includes a mortgage-interest tax deduction.

Whether you rent it out or not, you can deduct the mortgage interest as long as you use the home more than 14 days or more than 10% of the number of days the home is rented annually at a fair rental, whichever is longer. Qualified second homes include houses, condominiums, cooperatives, mobile homes, house trailers, boats or similar properties that have sleeping, cooking and toilet facilities.

Here's an interesting twist on the mortgage interest deduction: If you take out a home equity loan on your first home and use the funds to acquire your second home, the interest on the home equity loan is also deductible. That's three mortgage interest deductions off your tax return! Consult IRS Publication 936 for a complete discussion of how mortgage interest for a second home is deductible.

You can purchase your future retirement home now, at today's prices. Though your second home may be a vacation home now, if you buy right you can convert it into your principal residence later. They can produce their own income. Renting out a second home occasionally or often can help you pay for the property with OPM (other peoples money). Check with your tax advisor about how much of the upkeep and management expenses are deductible against your income Buying Tips From The Experts Buy something within a reasonable distance.

Be sure you can get to your vacation home in a short amount of time. Before you make a final decision, travel the distance on a typical Friday afternoon to see whether the drive will be too much to deal with after a long work week. Rent in the area several times before you buy. If you really like a particular area, check it out during different seasons. This way you get to know the climate, people, pests, traffic patterns and other regional particulars first-hand.

Consult other owners. Check with owners of nearby properties about public and private facilities, special maintenance required due to location or weather, the social climate, local development plans and prevalence of crime. Learning about the lifestyle of the area may help you narrow down your choices. Think home first, investment second. Although you may be able to generate rental income from your vacation home, it may not cover your ownership costs. (If you want to y real estate investments, give us a call to look at properties in the local area.) Consider different styles of properties in a vacation area.

To minimize upkeep and have a more secure environment, a condo may be preferable to a single-family home. If you plan on converting it to a retirement home, consider what type of home you'll want as a full-time residence.