The term snowbird is popular for a reason. The appeal of a home near family and an escape to warmth in the cooler winter months draws many to the sunny shores of Florida every year. Estimates from 2018 find that homeowners used at least 7.5 million properties in the Sunshine state as a secondary property.
Those who are looking to join this trend are not alone. Although always popular among the retired crowd, the draw extends beyond retirement years. More and more young, working people are taking advantage of remote work opportunities to flock to Florida during winter months.
Although appealing, a second property comes with a different level of financial obligations. Two considerations to discuss before moving forward with this type of investment include the following.
The initial cost of the purchase is just one consideration. If you already own a primary property, you likely know about the additional costs. These can include maintenance and HOA fees. But when it comes to second properties, you may need to add additional columns to the budget calculation. These could include travel costs and management fees.
On the plus side, a second property can help diversify your portfolio. When done wisely, property can serve as a way to build wealth.
Second properties can come with their interesting and complex tax obligations. The Internal Revenue Service (IRS) notes various factors can impact tax reporting, such as whether you rent out the property. Those who rent out a second property could get hit with tax obligations in two ways: first, the need to report the rental income and second the risk that they could lose the chance to deduct any mortgage interest or real property taxes from their federal taxes.
Dig into these questions to start a conversation before moving forward with a Florida property investment. If moving forward, it is also a good idea to have a professional review the real estate contracts. This can better ensure you fully understand the provisions and how they work to protect your interests — or not. Know that these contracts are negotiable. You do not need to settle for a boilerplate purchase agreement. You can have these drafted or edited to fit your specific transaction and better ensure the document protects your interests.