Establish a Price Range
First, establish a price range. Purchasing your second home should be enjoyable and not wear down on your finances. For purposes of a price range, assume that your down payment, closing costs, and furnishing will be 33% of the purchase price. In other words, if you have $50,000 in cash, your beginning price range should be between $130,000 and $170,000. However, with a second home a down payment can be a little as 10%, so if you are someone with $50,000 to put down you could qualify significantly more for a purchase price. Many borrowers may decide choosing a lesser price is ideal as it keeps monthly costs down. Second homes generally qualify at the same interest rate as a primary residence. These properties requires minimal personal usage by the owner to be considered a second home while still maximizing rental potential.
Great Location Means Great Value
Location is key when choosing a second home, especially when considering the investment for re-selling. Sarasota is great place to invest in your second home as it grows in popularity every day, gaining features in high end magazines such as Vogue and Forbes being known as a ‘Hidden Florida Gem’ and ‘Best Kept Secret.’ Although lately it has not been a secret at all, with Siesta Beach being ranked as the #1 beach in America by Trip Advisor and most recently rated #1 beach by Dr. Beach for its second time around. Owning a second home in Sarasota almost guarantees a great investment as it popularity continues to rise and remains one of the best places in the country to vacation.
Rent it Out
If you’re not planning on staying the whole year in your second home, this is a great opportunity to rent out to vacationers. Rental fees vary according to seasons and the popularity of the resort location. For most resorts, peak season weekly rental fees are usually equal to or greater than the property’s monthly mortgage payment, allowing you to break even with an annual occupancy around 30% from a cash flow viewpoint. There are even opportunities to write off operating costs. If you occupied the property fewer than 10% of the days you rented it or for less than two weeks you can deduct all of the operating expenses of the home including interest, utilities, cleaning fees, lawn maintenance, and management fees.
Property Tax Exemption in Florida
If you spend more than half the year – 183 days – in Florida, it is considered your permanent home. This is the basis for most state definitions of residency for tax purposes. But don’t expect state tax auditors to take your word for it. Keep a diary or log showing the number of days you spend in each state during the year. If the property is going to be your primary residence, you will be entitled to certain exemptions and benefits covered under the Homestead Exemption and Save Our Homes Amendment. In short, the standard homestead exemption in the State of Florida is currently set at $50,000. What this means is that the assessed or ‘taxable value’ of your property will be decreased by at least $50,000. As an example, if your home is assessed at $200,00 by the Sarasota County Property Appraisers Office, its taxable value would only be $150,000 so as long as it is a qualifying homestead property. There are some additional tax exemptions for homestead property that are available if you qualify.