Low summer 2006 bookings, TDC to increase advertising

[spinDrAtl]

Very good point. There is also an advantage to every trip that you make to the property. Certainly you do some sort of improvement or small fix to the property while you are there, so the trip (even if you view it as a vacation) can present a new list of deductions for you, mileage, supplies, etc.!

One thing to note here is that the deductions must be reasonable for the work you perform. You cannot deduct meal expenses for a week's trip if you have done 1 day's worth of repairs. Also remember to document everything (work, time spent, etc.) as good record keeping will go a long way in the event of an audit.

Also, some people miss the fact that you can finance more than one 'second home' at a time. Two ways to do this without committing mortgage fraud: generally most loan products will allow you to finance more than one home under 'second home guidelines' provided they are than 50 miles from each other and in vacation areas. OR, if you purchased a property as a second home a few years ago, but now you are going to purchase a better / nicer second home in the same area you may decide to keep the previous place as an investment property. A loan underwriter should understand that the new place will be your actual 2nd home now (and can still be rented out and shown on your taxes as an investment property). Since the first property was purchased and used for a period of time as a second home, no mortgage fraud or deceiving was done, yet you get to take advantage of the better terms for the life of both loans.

I do not believe that a 2nd home that is 50 miles or more from another second home has to be in a 'vacation area'. It could be in a city that you might travel to on a regular basis, for example. Also, to be classified as a 2nd home for loan purposes, you must not have any intention (at closing time) to rent the property and you cannot have any kind of management agreement in place.

What you do the day after closing is up to you and people's intentions and circumstances change all the time. Perhaps after closing your income was reduced and you now decide that you need to bring in some rental income on a property that was previously a 2nd home.

 

[jhelms]

One thing to note here is that the deductions must be reasonable for the work you perform. You cannot deduct meal expenses for a week's trip if you have done 1 day's worth of repairs. Also remember to document everything (work, time spent, etc.) as good record keeping will go a long way in the event of an audit.

Definitely. It all has to make sense, and I usually add notes to the back of receipts and keep them very organized in case of an audit.

I do not believe that a 2nd home that is 50 miles or more from another second home has to be in a 'vacation area'. It could be in a city that you might travel to on a regular basis, for example. Also, to be classified as a 2nd home for loan purposes, you must not have any intention (at closing time) to rent the property and you cannot have any kind of management agreement in place.

Correct, not sure why I was thinking vacation locale was a part of the definition, here's the actual definition we use:

• Must be located within a reasonable distance and suitable for year round residence.
• Owned by an individual and occupied by the borrower for some portion of the year.
• May be occupied by someone other than the borrower as long as occupancy is not under a time share.
• Borrower must have exclusive control over the property.

• May not be subject to any time sharing arrangements, rental pools, or other agreements which require the borrower to rent the property.
• Management firm can not have control over the occupancy of the property.
• Homeowner's Association can not require property to be rented.

• Rental income may not be considered in the credit qualification analysis.
• The Borrower's primary residence must be shown as the current housing expense.
• The monthly housing expense on the second home must be considered in calculating the Borrower's monthly debt payment-to-income ratio.
  

What you do the day after closing is up to you and people's intentions and circumstances change all the time. Perhaps after closing your income was reduced and you now decide that you need to bring in some rental income on a property that was previously a 2nd home.

Very good point about the intentions. Sometimes very interesting that the intentions change so soon after closing, but I guess it does happen.

Here's a couple of other links that talk about the tax issues:

http://www.hrblock.com/taxes/planning/life_events/second_home.html

http://www.taxprophet.com/pubs/2ndhom_nl.html

 

[spinDrAtl]

The key requirement on investment/rental property to be able to deduct expenses that exceed your income is that you 'materially participate' in the management of the property. The IRS requires 500 hours per year. Even if you use a management company, if you do repairs, advertise, answer inquiries, run a web site, book a substantial number of reservations on your own, etc. etc. you probably are okay, but again, meticulous records are best.

Disclaimer: I am not a CPA and you should discuss individual situations with your own CPA/Attorney.

 

[drsvelte]

one can only write off losses up to the amount of income they receive...so if losses exceed the income generated on the property, the tax advantage can be minimal...no?

You can deduct short term capital losses up to $3000 annually. Over that, they become long term capital losses.

 

[RiverOtter]

Our bookings are up. I am having a hard time booking a return trip

 

[NewUrbanGirl]

Good for you RO. Ours are up too, 15% over last year, and we still have the beautiful fall season to go. We just booked a guest to put us over the 50% rented mark for this calendar year. I must say, though, folks are booking quite a bit later than last year, so no one should give up on the season yet!

 

[Paula]

We, too, are booked for the summer at both our cottages up to the last week of August. Requests for fall are just starting to come in. We didn't raise our rates from last year. I think bookings for the summer came in a few weeks later this year than last year, but in the end it worked out fine. And I think more than half of our bookings came from our own advertising online. We also get several repeat guests. So far, so good...

 

[Underthebluemoon]

 

[Sheila]

We, too, are booked for the summer at both our cottages up to the last week of August. Requests for fall are just starting to come in. We didn't raise our rates from last year. I think bookings for the summer came in a few weeks later this year than last year, but in the end it worked out fine. And I think more than half of our bookings came from our own advertising online. We also get several repeat guests. So far, so good...

All 3 of our places are booked. I have also booked several weeks in August at all 3. Usually 1 week booked in August was about the norm.

 

[Beachbummette]

We are booked in both of our condo's up to August so far. Already some bookings for 2007! Looks like a good year for condo's. :clap_1: