Vacation home buying tips

If you’re planning to buy a vacation home — rather than simply engage in wishful thinking like the hubby and I do — you might feel like Charles Dickens is your Realtor.

It’s the best of times to buy a second home. If you can meet the new, more diligent lending standards mortgage rates are still quite low and prices in many retreat areas are down.

It’s the worst of times to buy a second home. Shoreline erosion is bad and getting worse, even before this year’s hurricane season hits its stride. And the onslaught of foreclosures, while creating some opportunities, also could mean problems for buyers.

That’s the word from Forbes magazine, which in its latest online edition offers Top Tips for Vacation Home Buyers.

One guess as to which tip caught my eye — Take taxes into account. The magazine warns:

State and municipal governments have been shifting the property tax burden to part-year residents, mainly through "homestead" exemptions and caps on increases in property tax assessments that protect only full-year residents. That’s a particular problem in states that don’t impose income taxes and so rely heavily on real estate levies. In Florida, a snowbird might pay 10 times as much in property tax as his full-year neighbor, reports Dominic Calabro, president of Florida TaxWatch. With property values falling and voters restless, it could get worse.

Other tips include avoid golf subdivisions, think like a Baby Boomer, consider the commute, widen your horizons, go for slow growth, watch water levels, make a big down payment, check rental potential, play vulture with caution.

Taxes everywhere: I must point out that tax considerations also are a part of the elaborations on water levels (special tax assessments to rebuild beaches), down payments (second home loan interest and alternative minimum tax issues) and rental issues (investment vs. vacation property tax differentiations).

Discussion of each of the tips can be found in this slide show.

Don’t forget insurance: And I’d like to add one tip not on the list. Consider the insurance implications.

Insurance is alluded to in the water level slide, but from personal experience I know that if you live in an area anywhere near a beach, your annual policy premium is going to be ginormous. And if you actually have to file a claim for, say, hurricane damages, you could face deductibles in the five-digit range.

I’m not saying don’t buy that fabulous beach-front place. I’m just saying be aware of the potential added expenses before and after a tropical storm strikes.