Thinking about Selling your Vacation Property?

Thinking about Selling your Vacation Property?
Breckenridge & Keystone

For many property owners, the appreciation could be high enough that you can sell your vacation property for a substantial gain, even after paying your selling expenses.  Perhaps there are new adventures on the horizon and, by freeing up capital, you could afford new opportunities that bring you or your family joy.  

Here are five questions to contemplate as a vacation property seller:

1. Does a 1031 Exchange make sense for you, especially if you intend to purchase an investment property of similar value elsewhere?  A1031 Exchange might be an option for some sellers who want to put off paying taxes on the gains of the sale of their vacation rental by purchasing a property for a similar value.  The 1031 Exchange is a third party who facilitates the exchange.  The use of a 1031 Exchange should be known prior to receiving an offer and provisioned in the contract to purchase.
2. How will your residency status impact your taxes and fees upon sale?  For example, any sale with a non-Colorado address may be subject to Colorado’s 2% state tax withholding upon closing.  Sellers who do not have a US tax identification number may be considered foreign sellers who can be subject to the federal Foreign Investment in Real Property Tax Act (FIRPTA) and these tax rates can vary based on sale price.  If you are selling a home in which you’ve primarily lived for at least two years prior to selling, it may be taxed with better tax breaks as a primary residence by the IRS.  
3. How will your capital gains taxes be impacted by the sale in this calendar year?  Particularly if you own a rental property and you’ve been taking depreciation annually, it can lower your basis for your claims and increase your capital gains tax upon selling.  Losses on other investments might also contribute to offset gains in a similar tax year.  For these reasons and more, you should consult with an accountant or financial adviser to anticipate these impacts to your bottom-line before you receive an offer.
4. Should you sell while the home is being rented?  If a property has bookings, it can still be a great time to sell the property, but zoning may be a factor to consider.  If the property is in a short-term rental (STR) zone that has STR rental licenses available, a prospective purchaser may view the future bookings as a nice opportunity for turnkey income.  However, if the property is in a zone without any STR licenses available, future rentals may be viewed as a workaround that defers the prospective buyer’s personal enjoyment.  
5. Will the shoulder season have a material impact on selling your vacation property?  In Breckenridge and Keystone, many vacation properties sell as well in winter/spring as they do in summer due to high visitor traffic at both times of year.  Some buyers may put a higher value on a property that they know they can immediately begin to enjoy during high season.  For this reason, even fall can still be a good time of year to list a ski vacation property.  

Taryn is a skilled vacation property real estate expert serving Breckenridge and Keystone and the surrounding mountain community.  After many years of living in Breckenridge, she has intimate knowledge of these resort area destination features and she knows how to market the value of amenity-rich vacation properties.  If you are thinking about selling your vacation property, contact Taryn for a complimentary market analysis today!

Are you considering selling or buying mountain real estate?   Taryn is a nationally certified Pricing Strategy Advisor (PSA) by the National Association of Realtors.  Taryn is a second-generation Realtor with experience in ski resort real estate and mountain cabins.  Contact Taryn Brooke by phone at 970.333.8297 or by email at taryn@coloradorealty.group.

Follow us on Social Media for more local updates..