If the cold weather on the mainland, or the low rates and low prices, or the high inventories, haven’t been enough of an incentive for you to start looking at a 2nd home or real estate investment on a tropical island paradise…maybe a recommendation from BloombergBusinessWeek will make the difference.
In a recent article by Venessa Wong, ‘You Don’t Need Millions to Own a Tropical Home,’ the author makes a convincing case for a purchase in the Caribbean. ‘Whether in the market for a second-home or a permanent residence, adventurous buyers can find island life to be a healthier, more laid back, and certainly warmer alternative. And now is the best time to buy in years. Unless of course you like digging yourself out of snow drifts.’
Wong’s key points:
1. Prices are down. ‘The global recession badly hit second-home markets across the Caribbean. Residential prices fell in the Bahamas, Turks and Caicos, and the U.S. Virgin Islands, according to reports on globalpropertyguide.com,’ among others.
2. Lifestyle. ‘With only a tepid recovery underway, many Americans are still questioning the value of buying a primary residence, let alone a second home on a distant island. Still, some big price reductions for beachfront homes – and a thirst for a more relaxed lifestyle – could tempt the most cautious investors.’
3. Inventory. ‘Activity may have improved, but buyers are not yet flocking in huge numbers to buy island homes. In fact, in a snapshot study Coldwell Banker shared with Businessweek.com, searches for Caribbean island homes by U.S. consumers on coldwellbanker.com dropped about 20% in the December/January period from July/August. (As this is a new feature, year-on-year comparisons were not available.)’
4. Tax Angles (for US buyers). ‘Mortgage interest and property tax are tax-deductible for owners who use the property as a second home – and do not rent it out. For owners who rent out their homes to cover costs, certain expenses may be deductible, but rental income is usually reported depending on how often the owner uses and rents out the home. According to Edward Mermelstein, a real estate attorney in New York, there is no restriction that the home must be on U.S. soil.
‘If the rental market is strong, the owner’s expenses can be low. Nearly two-thirds of second homeowners are able to cover at least half their mortgage by renting out their vacation home to travelers, according to Victor Wang, public relations manager for HomeAway.com.’
5. Research local differences. ‘The main challenge for home buyers looking for an island getaway is understanding local markets, as well as their laws. Although the Caribbean is only a short flight from the U.S., the islands have their own procedures and rules.
‘Not only are island homes vulnerable to dramatic hurricane seasons, but the cost of many staples, ranging from gasoline to food, can also be more than on the mainland, because most of them usually have to be shipped in. On some islands a prospective home buyer can encounter safety concerns, and local services and infrastructure, such as roads or wireless service, may leave much to be desired.’
The combination of rates, inventory, and price reductions is at least worth your consideration, even if you do a buy and hold until retirement in the future. Our Coldwell Banker agents can explain local laws and markets, and, of course, suggest the best areas to suit your needs and investment goals. Just call or email our office.