As travel resumes, many of us are beginning to plan for those long-awaited vacations we missed out on over the past year. Some households are focusing their efforts on buying a vacation home rather than staying in a hotel for personal space and safety. The National Association of Home Builders (NAHB) reports:
“Second homes (i.e., homes sold to buyers who are not going to occupy the home year-round, but use it as a vacation home, investment property, etc.) account for 15 percent of new single-family home sales.”
It’s not surprising that there’s an increase in demand for Sarasota vacation homes. The majority of Americans are realizing they prefer to be around small groups, as shown in a recent survey from The Harris Poll:
“Social distancing taught consumers new things about how they like to socialize; (75%) said, ‘during COVID social distancing I realized I preferred smaller social gatherings at home or at friends’ place.’”
Not only are Sarasota vacation homes seen as a potentially more pandemic-friendly way to travel and socialize, but they can also serve as an extended home-away-from-home. With more Americans being given the option to continue working remotely or retire earlier than expected, vacation homes can be used year-round. Many people are choosing to work from home because of the flexibility and safety of limiting the number of people they are around. This makes having a second home or vacation home desireable, because it gives them another safe place to be and work. The NAHB explains:
“Remote work arrangements have made it possible for some wealthier Americans to move to alternate locations that are not just small, suburban shifts from within their current metro area. More fundamentally, second home demand may also be benefitting by an acceleration of retirement plans, as well as stock market gains.”
A big reason that It is a great time to sell a vacation home in the Sarasota area is because there are so many people moving or planning to move to the Sarasota area in the near future. With low inventory, it is a prime time to be a seller, with seller’s getting record high prices. Add to that the low interest rates, and that also makes it a great time for buyer’s who are looking into buying a Sarasota vacation home. There are very few homes available, and with the influx of people coming to the area, chances are you will be able to sell your vacation home quickly, for a great price.
Selling a vacation home, like selling any home, requires a bit of planning. Ideally, Vacation homes should be listed when that area is in peak vacation season. When vacationing families are renting properties for weekend or several-week-long getaways, show them that your property is available for permanent ownership! Let them ride the high of a great family vacation right to your front door. “Season” in the Sarasota area tends to be from mid-October through April, although as more people move to the area, we are quite busy year round. There really is no “wrong” time of the year to list your vacation home for sale in the Sarasota area.
Vacation homes are often sold with furniture, because home owners with second homes may have nowhere to put an entire second home worth of furniture after the house sells. This can make it more desirable for a new homeowner who is buying their vacation home and who can simply move right in!
Sarasota is a city south of Tampa on Florida’s Gulf Coast and is one of Florida’s more affluent towns. In the past, it was one of the less conspicuous affluent towns but in recent times, it has been getting more notoriety. Vacation homes in the area are in higher demand because of this. Sarasota also boasts miles of beaches with fine sand and shallow waters in areas such as Siesta Key Beach, Lido Beach, Longboat Key, Venice Beach and many more.
Before you make a plan to sell your Sarasota Vacation home, you’ll want to understand the type of property you own and the potential tax ramifications of selling your house, then use that information to be strategic about your listing, marketing and timing. Selling a vacation home is similar to selling stock, timing is very important. It is a great idea to speak to a real estate professional in your area to determine the right time to sell your vacation home.
Whether you’re selling a primary residence, an investment property or a vacation home, timing is crucial. When dealing with a second home, sellers sometimes have a bit more flexibility with timing. Here are a few ways to know if it’s a good time to sell. Some vacation homes may be considered investment properties, but not all investment properties are vacation homes.Timing is as important in the sale of a vacation home. The good news is that, with a vacation home, the need to sell “right now” is less common.
One important thing people should consider when thinking about selling a Sarasota vacation home or rental property is calculating the capital gains taxes you’ll be responsible for paying.
Basically, a 1031 exchange allows a Florida real estate investor to defer the payment of federal capital gains taxes that would normally be incurred immediately upon the sale of a property when the profit from the sale is reinvested in a like-kind property of equal or greater value.
Here are a few tips to help minimize the capital gains on a vacation home in Sarasota:
-Offset your capital gains with other losses: If you have other major deductions — say you lost money in the stock market the same year — those losses can offset your capital gains liability.
-The new capital gains law allows homeowners in to avoid paying taxes on the first $500,000 of profit if they are married or on the first $250,000 if they are single and have lived in the home as your primary residence for two of the last five years. You are allowed to use the provision as often as you like, as long as it fits in that two year period. Any gains above the limit will be taxed at the new 20% capital gains rate – down from the current 28 %.
-The old law provided a $125,000 “one time” tax free exclusion on profits for home sellers 55 or older. This no longer is the case, but those who have used it will be allowed to use the new provisions without penalty in. Under the old law you could roll over gains if you bought a more expensive house. If you sold a more expensive home one and purchased a less expensive one you were liable for gains tax. Under the new law this provision is no longer in effect.
-Another option is to move in to your Sarasota vacation home for a few years as your primary residence. It may sound like we’re telling you to backtrack – you’re trying to sell the home, not live in it! – but hear us out. If you live in the home for two years then you can declare it as your primary residence and reap the benefits of the tax break.
-As a primary residence, the vacation home sale would not be subject to the same tax system as a secondary or vacation home, as residential homes are exempt from capital gains up to a certain amount. .
Another option for deferring capital gains taxes is to do a tax-deferred exchange, called a Section 1031 exchange by the IRS.
A tax-deferred exchange is a valuable investment tool that allows you to dispose of investment properties and acquire “like-kind” properties while deferring federal capital gains taxes and depreciation recapture.
The exchange aspect of it is if you exchange one piece of property of equal or greater value than the value of the property that you have, you don’t have to recognize any gain. You cannot accept any boot, and the amount of the liens or encumbrances on the property have to be equal or you have to have less equity in your property than the property that you’re acquiring as well as the purchase price being higher. To qualify as a Section 1031 exchange, a deferred exchange must be distinguished from the chase of a taxpayer.
For more information on possibly using a 1031 Exchange when selling your vacation home, check out this link below for more information and details on 1031 exchanges. The rules are ever changing so be sure to look for the most recent information.
https://inside1031.com/1031-exchange-in-florida/
Bottom Line
Sarasota ranks as the No. 1 Best Place to Retire in the U.S. for the second year in a row. The U.S. News Best Places to Retire analysis includes data about housing affordability, happiness, desirability, retiree taxes, the job market and access to quality health care.
https://money.usnews.com/money/retirement/articles/what-makes-sarasota-the-best-place-to-retire
-According to 2020 change of address requests from the United States Postal Service, Cape Coral and Sarasota, Florida were the No. 1 and No. 2 places in the country that people moved to. Other migration data sources point to the same conclusion.
https://www.sarasotamagazine.com/home-and-real-estate/2021/04/real-estate-sales-florida-migration
The demand for Sarasota vacation homes has increased and in the Sarasota and Manatee county areas is expected to continue to rise. If you own a vacation home in the Sarasota area and have thought about selling, now is a great time to take advantage of today’s high buyer interest. Let’s connect to discuss your opportunities in our Sarasota market today!
Steps to sell Sarasota vacation homes:
- If your property is a timeshare, condo or part of a homeowners association, make sure there are no rules about when you’re allowed to list and when you’re allowed to make repairs.
- Clean up and declutter, getting rid of unused items that might make the home feel small or outdated.
- Complete any necessary repairs.
- Make any upgrades to bring the property up to date — new appliances, for example.
- Find a real estate agent who specializes in Sarasota vacation home sales and your particular market.
- Use comparables from your area, which is to identify an appropriate price. This can be especially tricky in a vacation rental market, but your real estate agent should be able to guide you through the process.
- Write a compelling listing description. If you’re using an agent in Sarasota, they’ll likely complete this for you.
- Have professional real estate photos taken. This is especially important for vacation homes, as potential buyers may live in a different city, so they’re more likely to rely on online searching.
- Consider having your home staged so it will be more welcoming for potential buyers in Sarasota. This can be especially helpful in a competitive market.
The value of a vacation home depends on a variety of factors including proximity to various attractions, beauty surrounding the home, amenities on the property and the price of comparable homes in the area. Pricing a vacation home can be difficult for homeowners, so it’s best if you use a realtor.
Some factors that can reduce the value of a vacation home include:
- Remoteness. Vacation homes that are very far from businesses and services may appeal less to potential buyers.
- Accessibility. Vacation home Properties that are difficult to access are often more difficult to purchase, and thus are often worth less.
- Ability to rent the home. Often people buy vacation properties to turn them into potential rentals; properties that are difficult to rent may not sell for as much money.
When you are in the market to sell your vacation home property, always take your time so you can make the right decision. You want to make sure of your vacation home‘s value. A trusted Realtor is a valuable resource to make sure you are getting the best price and avoid common mistakes along the way.
