Convert 2nd Home to Primary Residence

Changing an Investment Second Home to Your Residence

A personal use second home will usually get favorable mortgage terms over investment real estate.

Banks often don’t consider the full amount in a cash flow statement for investment second homes when determining the investment value.

You should make loan approval a condition when buying investment second homes.

Did you know?

Investment second homes outnumber vacation second homes by more than five to one.

After years of renting your vacation home you’ve decided it’s time to move into the property and make it your primary residence. Maybe you’ve always planned on downsizing into your cozy lake getaway. Possibly you realize you’re spending a lot of time at the vacation home in a state with favorable state income and other taxes. Declaring the vacation home your primary residence will help you escape the state tax situation where your previous primary home is located.

Time the Move

If your vacation second home is slated to become your primary residence, you should be aware of the state tax situation of your two homes. If the tax burden is different between the two, time your move to minimize your tax exposure in the state where the burden is higher. Keep in mind some states tax more than your income. Many impose a tax on your intangible and tangible property. Intangible property includes stock options, commodity futures, and other similar investment vehicles. Tangible assets are personal property that can be seen, weighed, measured or touched.

Establishing Proof

Once you make the move, it’s important to establish your residence in the one-time investment second home. When you continue to own your previous permanent home it’s particularly important to keep a paper trail for the state taxman in case you need to prove your new residency status.

Your permanent residence is determined based on your intentions, and more importantly, evidence that you reside in the new location. This can be proved by having your car registered in the new state as well as holding a local driver’s license. Do register to vote in the new location and make sure you bank locally. Other methods of proof include spending time in the new permanent residence, and furnishing the home more lavishly than the previous primary home.

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