Buying Now and Moving to Hilton Head Later
If you’re able to buy a home in Hilton Head Island now and move there later, the time is right. Interest rates are at historic lows and market prices are flat, creating a buyer’s market. Plus, you get the additional perks of tax breaks on the second home, so you can deduct your mortgage interest just as you can with your primary home.
If you do buy now and move later, you can offset the cost of buying a home in Hilton Head Island by either renting out the house or using it as a vacation rental, something others in Hilton Head Island do all the time.
Your Hilton Head Home – Primary or Vacation Home?
Using your Hilton Head home as a primary or secondary home is a good investment either way. Hilton Head Island continues to be a favorite destination for tens of thousands of visitors each year who fall in love with the area and want to either come back very soon or stay here forever.
The Primary Hilton Head Home
If you’re looking to purchase a Hilton Head Island home as your primary residence, then you’ll be looking at different considerations than if you use it as a vacation home. As a primary home, location means something different to you. For example, if you have children you may want to be near schools or if you have health problems, be closer to a fire station, clinic or the hospital. If you’re an avid golfer, you may want to be adjacent to a fairway.
If you’re living here permanently you will also need to think about the space itself. You’ll want large closets and lots of storage. You may also want additional bathrooms or a larger living room or great room for entertaining the inevitable visitors to Hilton Head Island you’ll be hosting.
You may also want to give consideration to how many garages the home has. If it’s a primary resident you will have all your cars with you as opposed to probably just having one vehicle for a vacation getaway.
The Hilton Head Vacation Home
If you’re going to use your Hilton Head Island home as a vacation home instead, or as a vacation rental until you retire, there are other considerations. Location may not be as important, at least to community services. You may instead want to be closer to the beach or major resort areas. If you’re a golfer you can’t lose either way being near one of our many golf courses.
Storage is an important consideration with a vacation home too, though it may be the thought of having a lockable storage area where you can store all your personal possessions while family, friends and vacationers are using your home. This can either be a large locking closet in the home or a separate storage area.
If you’re going to have a Hilton Head Island vacation home, you may want to pay attention to the bedrooms and bathrooms. Having extra bedrooms can come in handy and the same is certainly true of bathrooms. Family, friends and vacationers have all sorts of different living arrangements to accommodate, depending on the make up of the party staying at your home.
The good news is you can write off the interest income from your vacation home the same way you do it with your primary home. As long as the two mortgages don’t exceed $1 million, you’re good writing the interest off on both. If it is above $1 million, you can only take the interest off on the first $1 million.
If you end up renting your vacation home out you still get the tax deduction on the mortgage, but you’ll have to fill out additional paperwork for the income you generate renting your Hilton Head home out. Your accountant or a tax preparer can help you sort this all out.
It may be more difficult to get a mortgage on a second home in Hilton Head. Times are tight for the foreseeable future and lenders may be reluctant to over-extend individuals with a second mortgage. Even if you can get a loan, it may come with a slightly higher interest rate, usually a quarter to a half percentage point higher than your primary residence. They will also require a higher down payment, because they want to see a better loan-to-value ratio on a vacation home.
The way to offset this is to put down as much money as you can on the second home in Hilton Head Island. If you can manage 20% down, you’ll also eliminate the need for private mortgage insurance, which will lower your monthly mortgage.
If you’re buying a vacation home in Hilton Head Island you’ll have to have squeaky clean credit, a high credit score and more discretionary income on your balance sheet. They will want to see a larger reserve for your vacation home. Two to three months of income is the norm for a primary residence. For a second home in Hilton Head Island or a vacation home in Bluffton can require twice the reserves.
Even so, lots of Hilton Head Island residents have two homes, a home in Hilton Head or a Bluffton home and a primary residence elsewhere. For some the Hilton Head Island home is a permanent vacation home or a rental. For others, it’s only a vacation home until the day they retire and can live on Hilton Head Island permanently. Either way, a home on Hilton Head Island can be a smart investment.
Renting Your Home in Hilton Head
If you purchased your home in Hilton Head Island as a retirement property, you may want to consider renting it to generate additional revenue. This is a great way to cover the costs of your retirement home in Hilton Head Island or Bluffton since renters pay the costs of the home plus a little extra.
You can hire a property management company to manage the rental. In essence, they become the “landlord”, taking in payments, arranging for any maintenance to be done and handling the credit reviews and legal contracts for new renters. They take a percentage of the monthly rent, but you don’t have to deal with the renters.
Leases are usually a year at a time with the option to renew at the end of the lease term. Keep this in mind when planning your retirement. You don’t want to reach the magic day where you can retire, only to find that the home of your dreams in Hilton Head Island has 11 months to go on the lease.
A good property management company will also carefully screen renters, ensuring they have good credit and references. Getting poor renters is one of the greatest concerns of homeowners who are renting out their Hilton Head Island home. But a property management firm can help in this regard.