Research regarding the vacation and second home market indicates the secondary home market is strong and thriving. And it is easy to understand why the Mountains of North Georgia and Southeastern Tennessee, is the location where many people are running to "escape" from all the stress of normal city living. You can do it - and I will help make your dreams come true to find that perfect escape !

Whether it is a vacation home or a rental property, a second home in the mountains can give you many of the same personal and financial benefits as your primary first home. Make sure you understand the tax implications before you buy so that you can make the most of your investment.

LIFESTYLE BENEFITS

If your second home will serve as a personal getaway, you are probably looking forward to having a place to relax with friends and family. Whether it is a home on Lake Blue Ridge, or a log cabin in the woods of North Georgia, knowing that you can retreat from the hustle and bustle of daily life to your own private vacation spot has an obvious appeal.

IS BUYING A SECOND HOME A GOOD INVESTMENT?

Although it is not possible to accurately predict the future investment potential for resort properties, certain trends indicate a promising future.

According to a recent survey by the National Association of REALTORS®, the aging of baby boom generation and the historically strong performance of real estate as an investment are driving up demand for second and vacation homes.

Mortgage interest rates also play an important role when it comes to buying a second home. They increase affordability by lowering the monthly payment, often allowing homeowners to purchase a more expensive home.

Appreciation in home values also is helping boost second home sales. In the past five years, home sin the United States have appreciated an average of 37 percent in value. As a result, homeowners may be able to tap into the equity in their primary residence to make a down payment on a second home.

Coupling these factors together indicates that long-term investment potential in second-home ownership looks optimistic.

Investing in a second home has the potential to pay in a number of ways. First there are the same financial rewards that come with homeownership in general. Tax deductible interest* and possible price appreciation. In addition, you may be able to use the home as a source of rental income. If it is a vacation home, renting it out for part of the year can help offset the costs of ownership. If it is strictly a rental property,  you can use it as a  significant source of income--although the tax implications may be somewhat different. Make sure to consult your tax adviser or CPA.

TAX IMPLICATIONS

You can deduct the mortgage interest you pay on a second home, but not on an investment property. Which category your home belongs in depends on how you are going to use the property. To the IRS, a second home is one that you personally use at least 14 days per year, or at lest one day for every 10 days it's rented out, whichever is greater.

Although you can't deduct mortgage interest for an investment property, you can deduct operating expenses (such as maintenance and advertising costs) that exceed the rent you collect, as well as losses on the sale of the home. Neither is deducible for a second home.

*Consult your Tax Adviser

As with any real investment,there are various risks including,but not limited to: loss of principal, variations in occupancy which may negatively impact cash flow, liquidity and limits on management control of the property. The material contained and discussed on this website is for educational purposes only and should not be construed as legal or tax advise, always consult with an attorney and/or tax adviser prior to taking any action. Does not constitute an offer to buy real estate.

BUYING A VACATION GETAWAY

With the hustle and bustle of everyday life, many people and families dream about owning a personal retreat, and increasing numbers of homeowners are living out that dream by purchasing a second home in the mountains of Northern Georgia and S.E. Tennessee. I can offer you guidance in:

• Matching your lifestyle to the perfect area and Mountain Activities
• Seasonal Trends
• Property management and rental service
• Factors affecting resale value
• Financing your vacation home in the Mountains
• Possible tax breaks or implications
• Log Home construction and upkeep
• Peace of mind that I will be there to help you through the entire buying or selling process

Choosing a location

Do you want to be the middle of a vacation hot-spot, or enjoy the peace and tranquility of a secluded location? Whichever environment you prefer, here are some things that you should consider.

         Popularity. A house in a hot vacation market will usually cost more than a place that is off the beaten path. At the same time, continued popularity may help you profit from long term appreciation.

         Proximity to your REAL home. If you plan to visit regularly, look for a place that is easy to get to.

         Rental possibilities. If you are hoping to offset some costs by renting the home out part of the year, find out about seasonal demand for rentals in the area you are looking to purchase a home.

WHAT ARE MY FINANCING ALTERNATIVES?

Financing a second home is similar to financing your primary residence. A lender will evaluate your credit history and rating, debt-to-income ratios, verify your employment history and bank deposits.

While most lenders require a minimum down payment of 20%, many require less. But all require the borrower to have a source of income that covers repayment of the debt ans allows adequate funds for expenses relating to the use of the property. There is also certain guidelines most second home lenders take into consideration.

• The property should be remote in distance or time of travel from your primary residence, but at a reasonable enough distance to function a second home.
• The property must be located in a resort area that would generally appeal to vacationers.
• The mortgagor (you) can rent out the property, but the property cannot be subject to an agreement that gives a management firm total control over the occupancy.

The lender will also evaluate the appraised value of the property, its suitability for year-round occupancy and its conformity with local building and zoning regulations. As an option, you may also want to consider refinancing your primary residence as a down payment source.

As financing terms change frequently, keep in touch with me for the most up-to-date programs.

CAN I AFFORD TO BUY AND MAINTAIN A SECOND HOME ?

Second-home and vacation home ownership is surprisingly affordable. According to the National Association of REALTORS, the typical second-home owner earned a household income of $85,900 in 2003.

Of course, your own personal finances will determine the purchase price that you can afford.

You should also keep in mind that, in addition to your mortgage payments, taxes and insurance, there would also be maintenance and travel costs to and from your primary residence.

To offset some of these expenditures, you may want to consider renting your property or even investing in a vacant lot now and building your dream cabin or home later down the road.

WHO WILL TAKE CARE OF THE PROPERTY WHEN I AM NOT THERE?

Since you will not occupy your vacation home on a year-round basis, you should consider ways to maintain your investment when you are not there.

Property management is available to homeowners in North Georgia on a fee basis with services ranging from maintenance to housekeeping.

If you plan to rent your property, using a professional property manager is highly recommended. They offer a variety of services including renter relations, security deposits and rent collection. ANd most important, they'll ensure you piece of mind while you're away. I can help with recommendations to these services.

WHAT FACTORS MAY AFFECT THE VALUE OF MY HOME?

If you are buying a second home with resale as your ultimate objective, you should keep these factors in mind:

• A property located in driving proximity of a major metropolitan area will have greater sales potential when it is time to sell.
• A property convenient to shopping, restaurants and local attractions will be more desirable than a more remote location.
• An area that offers recreational activities during more than one season will appeal to a wider selection of potential buyers.
• An attractive, well maintained property is always going to sell much faster. Keep it looking good is important.
• A property with a good rental history will be more desirable to a buyer with investment potential in mind.

When it comes to buying or selling a vacation property in the Mountains of North Georgia or Southeastern Tennessee, I have the Experience, Resources, Professionalism and Services to locate your new home or vacation log cabin.

I LOOK FORWARD TO WORKING WITH YOU !

John Harte

REALTOR®