The many memories that may be tied up in a vacation home may make it hard to decide what to do with your property. At times, we know it might benefit us to sell the vacation home. Other times, we don’t want to lose the place where so many memories occurred. Family members may still chuckle as they recall when, after many tries, Johnny finally got up on those water skis. Or, there may be the indelible memory of a daughter having an outdoor wedding with the spectacular ocean view as a backdrop. However, if finances are now in the picture, it may be time to sell. The market has recovered and there is strong demand again. Deciding what to do is only the hard step.
A chief investment officer for Wells Fargo, Rick Robinson, poses a simple question when deciding whether or not to sell your vacation home: Is the property an asset or heirloom?
Factors that Lead to Decisions
In any case, detaching enough to look at the cold, hard facts can at least be an important step in the process of deciding whether it is feasible and sensible to still keep that vacation home. The condition of the second home is the obvious major issue. As owners of vacation homes age, so do their properties. The need for repairs, including expensive repairs, may be on the rise.
Has your primary residence location changed? For example, retirees moving to another state may still love the now-longer trips to the property, but they find that the trips are just becoming too infrequent and too costly. Another consideration is the mortgage, if there still is one. Is the monthly payment starting to become a burden? Can the burdensome nature of the mortgage be ameliorated by refinancing and/or restructuring?
Then, there are a host of intangibles. Is this home still the family gathering place that it once was?
As the children start their own families and the grandkids begin to visit, it is possible that the extended family may be outgrowing the home. Or, is it possible that increasingly busy lives make the rendezvous “at the beach” so uncommon that a vacation rental now makes more sense when the family wants to get together? This option can serve a couple of purposes. It can remove much of the financial pressure. Plus, different sites can be chosen that can prove interesting and exciting for the various family members, especially the children.
Estate Planning Vis-a-Vis the Vacation Home
Should you decide to retain the property for future generations, it can be advantageous to contemplate costs for the long-term. Designate an account for upkeep and maintenance, and then make sure that this account can remain properly funded as circumstances change in the years to come.
If You Decide to Sell Your Vacation Home
Timing is as important in the sale of a vacation home. The good news is that, with a faction home, the need to sell “right now” is less common. Determine whether market conditions in the particular area are conducive to a sale. A conversation with your tax adviser may impact the timing of a sale as well. For example, personal residence exemptions could come in to play if the timing is right. The conveyance of the property to heirs needs to be handled in a way that intelligently minimizes the overall tax impact.
Deciding on Your Vacation Home
Every family situation is very different, but many of these questions should be asked by most who have had vacation homes for a lengthy period of time. If have been thinking of selling your vacation home, see how much your property is worth and learn what the selling process would be like.