If your Memorial Day dreams include a summer home away from home, low mortgage rates and a slowing vacation home market could make a second home purchase an attractive place to park investment dollars.

Whether your goal is to use for family vacations, rental income or an eventual retirement residence, first do some soul searching into your finances.

Review your budget to make sure you have a solid emergency fund and cash reserves for unexpected expenses and repairs. Look beyond the purchase price to annual property taxes, insurance, utilities and maintenance costs.

If you plan on using it yourself and also rent out to offset costs, do your homework. Gather data to determine if the local rental market is year-round or seasonal and what you can charge per night or week.

Vacation homeowners have an array of online advertising options like Airbnb, VRBO & Homeaway, but be sure and check local ordinances for short term housing rentals. Look for property managers or rental agencies that may be able to help with scheduling tenants and maintenance.

Seasonal rental income can offset costs, but don’t overestimate your potential earnings, and plan for times when you will be on the hook for all property expenses, regardless of cash flow.

Consult with a tax professional.

Property tax rules and deductions for second homes are complicated and vary widely depending on the number of days per year you occupy the home.

Tax changes from the 2017 Tax Cuts and Jobs Act capped mortgage interest deductions on loans up to $750,000, including second homes. Ditto on property tax limits of $10,000 per taxpayer.

If you rent the home out more than 14 days a year, and use it less than 14 days or 10% of the number of days the home was rented, IRS will consider the property a rental and not a second home, and you can deduct rental expenses.

Research the location. Make sure you have visited the area many times over different seasons if possible, and look into any local environmental issues. Most second home buyers choose a property within driving distance of their primary residence.

The farther away your vacation home is, the more difficult it will be to take care of maintenance and upkeep, and the less likely you will be to visit often and get the real return on your investment.

Adriana Donofrio • deasypennerpodley Glendora (626) 926-9700 • adonofrio@dppre.com