Even though the original American Dream is to own a home and might always stay the same, there’s a slight variation on that standard in 2020 – to own a vacation home as well.
And in case you are wondering where you should invest your hard-earned money and buy a vacation property, Los Angeles makes the perfect sense. Here’s why.
The city is a great place to own a real estate property and settle during your holidays, as there are countless entertaining activities 365 days a year.
And yet, whenever you feel like taking a quick break from the crowded streets of Los Angeles, the city’s iconic freeways can take you to numerous getaway destinations, many within a one-hour drive.
Whenever you feel like you want to spend the afternoon catching the desert sunshine, you can visit the mid-century modern aesthetic of Palm Springs.
If you want to enjoy fresh seafood for lunch, you can hop to Rosarito Beach just across the border or escape to an island as Catalina Island is only a 90-minute boat ride away from Los Angeles.
Mammoth Lakes, Santa Barbara, Laguna Beach, Joshua Tree National Park, and many more famous tourist destinations are well within your driving range.
If you decide on settling down in Los Angeles, you can visit a different destination on each day of your summer or winter holidays.
Still, there are plenty of things to take into serious consideration before you give the final nod and acquire your dream vacation home in Los Angeles, California. Here’s everything you need to know.
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Determine the Financing
Perhaps the most significant factor in preparing to acquire a vacation home is determining the budget for your future real estate property.
Make no mistake; owning a vacation home is not only what you pay for it. You will also need to pay taxes, insurance policies, HOA and condo fees, and other items like furnishings or seasonal gear.
Besides, even when your vacation home is unoccupied, you will still have to pay gas, electrical, water, trash removal, landscaping, and similar charges.
Factor these overhead costs into your budget, because nothing can ruin the perfect vacation home like being over your head financially.
Take the time and think about how you will be financing your Los Angeles vacation home. Paying in cash is the best option, but it isn’t always possible. Perhaps you will take a loan to buy the property.
Sit down with your accountant or even better, with a specialized mortgage broker in Los Angeles to ascertain which type of loan makes the most sense. Set the right budget, discover how much you can put up for a downpayment, and you are good to go.
Spend Some Time in Los Angeles Before You Buy the Property
Even if this suggestion sounds basic, never buy a vacation home until you’ve visited and experienced the area several times. Spend some time in the Los Angeles area and make sure that you adore and can’t get enough of the city before you commit to buying.
Owning a vacation home doesn’t allow you to change destinations easily if you get tired of the scenery, so ensure that you like everything that the Los Angeles area has to offer.
Consider Having a Rental Income Option
The smart vacation home acquisition is the one that embodies a rental potential into the equation. If you manage your real estate correctly, many of the costs listed above can be managed by rental income.
Try building a long-term investment standpoint, as rental income can allow you to generate equity and eventually pay off the property.
Before you purchase the land, analyze the nearby vacation homes, talk with various real estate agents and vacation rental services based in Los Angeles, and observe what’s renting and for how much.
Protecting Your Investment
Life happens, so there will be times when you won’t be able to get away from your everyday commitments and get to your vacation home.
It’s never satisfactory to leave your home away unattended for prolonged periods, so consider talking to a security service or installing a surveillance system on your property.
Another option here is to hire a property manager to maintain your home and give yourself peace of mind while you are not there.
Even though this service will cost you some money, so will the damages caused by neglecting the leaky roof, burst pipes, or other similar maintenance issues if they go unnoticed for a more extended time.
Assure to make friends with trustworthy neighbors from the area so they can keep an eye on your property while you are absent.
Taxes on Vacation Homes
Per the Internal Revenue Service (IRS), every vacation home, no matter where it’s located, is either classified as a personal residence or a rental property.
If you limit renting it out to fourteen days or fewer per year, it’s considered as a private residence. If you rent it out more than fourteen days per year, it’s automatically recognized as a rental property.
Either way, as the property owner, you will have to report rental income, notwithstanding its official classification.
If your vacation home in Los Angeles is classified as a rental property, you won’t be able to demand the mortgage interest tax deduction.
Nevertheless, you can request losses on your rental if the amount you spend on the property exceeds the rental income, as you can report these losses on Schedule E of your Form 1040.
It’s for the best to talk to a highly skilled tax professional to find out more about your potential liabilities and tax deductions.
Final Words
Possessing a vacation home in the Los Angeles area is pretty much the dream. A second home to solely use for holiday getaways and relaxing is an appealing idea for everyone.
If you seriously consider owning a vacation home in Los Angeles, now is an excellent time to search for property deals as home prices in Los Angeles are somewhat stalling for the first time in decades, and mortgage rates remain pretty low.
Read through our short article, and don’t hesitate to buy one now.
