Home away from home

Buying a vacation property can be a wise way to invest disposable income. Interest rates are still at record low levels, and the tax laws are favorable toward home ownership.

Record numbers of baby boomers are buying second homes. In 2002, 460,000 consumers joined the ranks of second-home owners.

According to the National Association of Realtors, one in 10 Americans owns more than one house. More than half of those say they use the second home as their vacation getaway, while 18 percent plan to retire there, 16 percent are diversifying their income and 15 percent plan to earn income from renting it.

Because buying a second home can be a different experience than buying your primary residence, here are some tips and thoughts to consider.

* Location, location, location. Still a real estate mainstay, you need to determine the best place for you. The most popular settings are near bodies of water and mountains, in more rural settings rather than urban. However, a growing trend has long-time suburbanites buying in-town residences as a getaway or investment.

Research locations for climate, affordability and demographics. Also, think about how long you want to travel to get to your second home. Most experts agree that the ideal distance is two to two-and-a-half hours, with four hours being the outside limit if you want to use it as weekend escape.

* Make a list of your interests. Remember, the point is to enjoy life more and spend it with those you love, so identify the pastimes you enjoy — boating, skiing, golf, hiking, etc. Your second home should give you the chance to spend your leisure time doing the things you like to do.

* Know the income tax laws. Vacation homes used primarily by the owner may be considered personal residences, and individuals may be allowed to deduct mortgage interest of up to $1 million of mortgage debt on two personal residences and up to an additional $100,000 for home equity loans. Additionally, you may be able to rent your second home for up to two weeks and still take advantage of the deductions in property taxes. Consult your tax adviser for answers to all of your questions.

* Timing is everything. Almost all real estate markets, especially vacation/resort markets, have a seasonal slump, when buyers may be scarce and purchase prices lower. Talk to a real estate professional who knows the market and can educate you in making the best decision.

* Make a vacation out of the search. Spend time in the destinations you are looking at to get a feel for the travel time, the culture and amenities. Talk to a real estate professional about possible rentals in the area so you can gain a better sense of what it would be like to live there.

Time and money are two of our most valuable assets. Investing in a second home may be a great way to increase both.

Jim Schmidt is president and CEO of Coldwell Banker Residential Brokerage. His company includes 27 real estate branches plus specialty divisions – The Condo Store, Builder Developer Services, Commercial and Corporate Relocation. Additionally, the firm offers mortgage, title and closing services through its affiliated companies. Coldwell Banker Residential Brokerage is a member of the NRT family of companies.

For more information, call (404) 705-1500 or visit www.ColdwellBankerAtlanta.com