With a home equity line of credit, or HELOC, you can use your home’s equity to cover costs like renovations, education or emergency expenses. With Americans collectively holding about $17.3 trillion in home equity, a level not seen in decades, many homeowners now have more borrowing power than they realize.

A HELOC’s flexibility is appealing, but your monthly payment can shift based on your credit, loan terms and interest rate. Understanding how those factors work is key before tapping your equity.

Here’s what a $50,000 HELOC may cost each month and how to decide if this type of financing fits your needs.

What affects your HELOC payment?

Many factors affect your HELOC payment, so it’s important to consider your specific situation and how these factors will impact your rates:

• Credit score: If you have a high credit score, you’re more likely to qualify for a lower HELOC interest rate. If your credit score is lower, though, you’ll probably have a higher interest rate. Keep in mind that even if you have a HELOC already, if your credit score drops during the loan term, your lender might increase your interest rate because they consider you a higher-risk borrower.
• HELOC term: Your HELOC term will affect your rates, too. Shorter terms usually carry lower interest rates, and longer terms will typically have higher interest rates. Most HELOCs consist of a draw period ranging from five to 10 years, during which you make interest-only payments. The repayment period can last 10 to 20 years, and during that period, you’ll be repaying the principal and interest, meaning your payments will increase.
• Loan-to-value ratio: Your loan-to-value ratio compares the amount of your loan to your home’s appraised value. The lower this ratio is, the less risky lenders consider you to be, meaning you’re likely to get a lower interest rate. According to First Merchants Bank, you’ll need a loan-to-value ratio of 90% or lower to qualify for a HELOC. For the best interest rates, your loan-to-value ratio should be 80% or less.
• Prime interest rate: Your HELOC interest rates are based on the prime rate, which is affected by the Federal Reserve’s actions. According to the Wall Street Journal, the average HELOC interest rate as of November 11 is 7.82%.
• Lender margins: In addition to the prime rate, each lender can add their own margins to determine your final interest rate. Lender margins can be negative or positive, and they vary from lender to lender. As a result, it’s best to shop around and compare quotes from multiple lenders before taking out a HELOC.
• Variable rate adjustments: Most HELOCs have a variable interest rate, so your interest rate can change throughout the term of your loan. As the prime rate fluctuates, your interest rate could increase or decrease, too.
• Rate cap: Many lenders implement an interest rate cap to protect you if interest rates decrease dramatically. Often, that cap is around 18%, but that can vary depending on your lender.

How much a $50,000 HELOC costs per month

Here’s an example of what a $50,000 HELOC could cost based on current rates and typical loan terms. The United Nations Federal Credit Union HELOC payment calculator makes this easy.

If you have excellent credit and a low loan-to-value ratio, you might qualify for an interest rate around 7.82%. With a 10-year draw period followed by a 20-year repayment period, your payments would begin as interest-only and later shift to principal and interest.

The table below outlines how those payments break down:

Note: These payments don’t account for potential changes from a variable interest rate. Your actual monthly cost may increase or decrease over time.

HELOC vs. home equity loan: What’s the difference in monthly cost?

Like a HELOC, a home equity loan lets you borrow against your home’s equity, but the structure is different. A HELOC gives you flexibility to borrow only what you need during the draw period, while a home equity loan provides a single lump sum upfront.

Home equity loans also come with fixed interest rates, which means your monthly payment stays the same throughout the life of the loan. That predictability creates a very different cost profile compared with a HELOC’s variable rate and interest-only draw period.

Because of those differences, your monthly cost on a home equity loan may be more stable, while a HELOC’s payment may rise or fall over time.

Use the tool below to explore some of today's top home equity offers, powered by Bankrate:

Pros and cons of borrowing $50,000 from your home equity

There are several pros and cons to taking out a $50,000 HELOC. Its biggest advantage is flexibility. During the draw period, you can borrow, repay and borrow again up to your credit limit. For example, if your limit is $50,000, you could borrow the full amount, repay $15,000 and then borrow that $15,000 again whenever you need it.

This revolving structure makes a HELOC useful when you’re unsure how much you’ll ultimately need, such as when funding education costs or paying for a home upgrade or renovation.

During the draw period, another advantage of a HELOC is that your required payment typically covers only the interest, not the principal. You can choose to pay down the principal during this time, but the option to make interest-only payments keeps your initial costs lower. That trade-off does mean your principal and interest payments will be higher once the repayment period begins.

There are downsides to consider, too. Most HELOCs have variable interest rates, which can rise or fall throughout the loan term. Because your rate isn’t fixed, your monthly payment can change, and you’ll need to be prepared for potential fluctuations as the prime rate moves.

A HELOC also uses your home as collateral. If you’re unable to make the required payments, you could put your home at risk. It’s important to weigh that possibility carefully and make sure you’re comfortable with the long-term commitment.

When a $50,000 HELOC makes sense

A $50,000 HELOC can make sense in several situations. It’s often used for home improvements, particularly if the renovation is likely to increase your property’s value. It can also provide quick access to funds for large or unexpected expenses, such as medical bills, education costs or business startup needs.

A HELOC may also work as a debt consolidation tool. If you’re carrying multiple high-interest debts and qualify for a lower HELOC rate, you could use the line to pay those balances off and replace them with a single monthly payment. Just be mindful that HELOCs have variable interest rates and longer repayment periods, which could result in higher overall costs if rates rise.

As with any borrowing decision, it’s important to consider how predictable your expenses are and whether the flexibility of a HELOC aligns with your financial situation.

Tips before applying for a HELOC

If you decide a HELOC is right for you, it’s important to carefully shop around. Interest rates and rate caps can vary from lender to lender, so get multiple offers and compare them. Make sure that you understand all of the terms of the loan, and if you’re not clear on something, ask for more information.

A HELOC may be helpful in certain situations, but it’s not the right choice for everyone or every scenario. Consider the long-term affordability of this type of loan and make sure that you’re comfortable with the risks before you take out a HELOC.

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Fortunately, you could have a say over how much the taxman takes if you’re willing to relocate. But you should consider a state’s overall tax landscape before making a move.

For instance, some states make up for low income taxes with higher taxes in other areas, such as sales and property tax rates — making you perhaps no better off than you were before relocating, tax-wise.

Kiplinger found the one U.S. state that might offer the best balance of low income, sales, and property taxes for your family’s wallet.

The most tax-friendly state for the middle class

To determine the “most tax-friendly state for the middle-class,” Kiplinger considered each state's median annual salary to determine which states have the lowest tax burden for households with middle incomes.

Then we calculated the average annual tax spent on three tax categories: state income tax, property taxes, and sales taxes on essential items (groceries, diapers, and gas). (See the end of the article for more information about methodology.)

The state with the lowest tax burden is considered the most "tax-friendly " for these rankings.

Best state for middle-class taxes

Nevada.

Nevada has no state income tax, which is one reason it’s the most tax-friendly state for middle-class families. Among the many types of income that you’ll find tax-exempt in the Silver State are:

• Investment income (Nevada is one of the most tax-friendly states for investing).
• Short-term rental income and capital gains.
• Most retirement income, such as 401(k) withdrawals and Social Security benefits.

Nevada residents save on property tax bills, too. The annual median property tax paid in the Silver State is $2,143, which is about $1,000 less than the national average, according to U.S. Census Bureau data.

• This is partly due to Nevada’s effective property tax rate of .49%, per the Tax Foundation, which is one of the lowest rates in the nation.
• Nevada has a property tax abatement law that caps yearly increases on property taxes for primary residences, protecting homeowners from sudden hikes.

Even better is that the Silver State is one of the few states that don’t tax inheritance or estates, meaning more money for your heirs is also tax-exempt.

But although these tax benefits generally outweigh the tax cons in our ranking, as with all states, there might be a few tax reasons you wouldn’t want to move to Nevada. Let’s go over those next.

Nevada taxes for middle-class families

Nevada has low taxes compared to other states, yet there is one primary tax caveat that might raise an eyebrow for middle-class families.

• The Nevada sales tax rate is 6.85%, which may be higher than where you are living now.
• This is especially true when you factor in local taxes, which average 1.39%, for a combined average local and state tax rate of 8.24%, per the Tax Foundation.

Yet while Nevada might levy higher sales taxes to compensate for lower taxes in other key areas, several essentials are exempt from the Silver State’s high sales tax rate.

• Nevada has one of the lowest state gas tax rates in the U.S., which might help reduce your weekly commuting expenses (though local taxes can raise the rate).
• Groceries, diapers, prescription medicine and feminine products are all tax-exempt in Nevada, which might further reduce your monthly spending.

If most of your annual spending is on essentials, you might save on your state sales taxes even if the Nevada rate is a little higher than where you currently reside.

Is Nevada a good state for middle-class families?

Before you’re ready for a move to Nevada, there are other important factors to consider.

While Kiplinger’s ranking considered state tax burdens, you’ll probably want to research other key considerations, like cost of living, political climate and crime rates.

• For instance, Nevada is famously known for extreme heat, which might increase your monthly utility bill. The state’s desert geography makes the transportation of goods more challenging and limits local agriculture compared to most other states. Because of this, the cost of groceries might be higher than where you live now.
• Yet year-round sunshine supports Nevada’s thriving outdoor recreation scene, with a variety of national parks, and entertainment centers like Las Vegas.
• However, Nevada typically receives a lower score in national rankings that compare pre-K-12 education quality and outcomes.

Ultimately, consider your family’s unique lifestyle and financial needs before deciding to move to a new locale. Just because Nevada is generally the most tax-friendly state for middle-class families, it might not be the most optimal state for you and your family.

Note: No matter where you move, federal income taxes still apply, and local taxes might vary. The definition of “middle-income” can also differ greatly. For purposes of this ranking, “family” means any household with at least one adult still raising at least one child. The amount of taxes paid can vary depending on several factors, including family size and the number of adults in the household who work. Full details about the methodology Kiplinger used to rank state tax burdens for this story are available in Kiplinger’s report, Low-Tax States for 'Middle-Class' Families in 2026.

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Homeowners today are sitting on a historic amount of real estate wealth. Americans collectively hold about $17.3 trillion in home equity, a level not seen in decades.

At the same time, borrowing costs tied to that equity have begun to ease. Many home-equity loans, home-equity lines of credit (HELOCs) and cash-out refinances have recently dipped below 8%, after peaking much higher during the rate-hike cycle.

With 2026 approaching, a year that could bring both lower interest rates and tax-law changes, many homeowners are weighing their options. Should they tap their equity now, or wait in hopes of better savings later? Here is how to think about the trade-offs.

When borrowing now makes sense

Pulling equity out before the year ends can be a smart move in several scenarios, especially if you’re using funds strategically. Here are a few reasons when tapping your home’s equity might make sense.

You’re planning a renovation or essential home project.

If your roof, HVAC system or major appliances are nearing the end of their lifespans, tapping equity can be far more affordable than turning to high-interest credit cards or personal loans. Even slightly lower home-equity rates can translate into substantial long-term savings on large projects.

You’re consolidating high-interest debt.

Credit card APRs regularly sit above 20%, so even a home-equity loan in the 7% range can slash interest costs. For disciplined borrowers who won’t fall back into high-interest balances, tapping equity can serve as a true reset for their budget.

You want flexibility and expect rates to fall.

A variable-rate HELOC lets you borrow only what you need when you need it, and you’ll only pay interest on the amount drawn. If market rates continue to decline into the new year, your HELOC payments could adjust downward accordingly.

You’re confident in long-term home value and stable cash flow.

If your income is steady and your local housing market remains resilient, borrowing today might offer a healthy balance of affordability and liquidity without adding unnecessary financial strain.

Why waiting could be smarter and what’s at stake

Patience can pay off, especially if rate forecasts hold. Here are a few reasons you might want to wait before tapping your home’s equity.

Additional rate cuts might lower borrowing costs.

Some analysts expect the Fed to continue trimming rates into 2026. If that plays out, fixed-rate home-equity loans and even cash-out refinances could become cheaper next year. Shaving even half a percentage point off a large loan can save thousands over time.

Fixed-rate borrowers stand to gain the most by waiting.

Unlike HELOCs, which can adjust downward as rates fall, fixed-rate loans require you to lock in a rate at closing. If you’re planning a major home improvement project next year, delaying could give you more room to secure a better deal.

But waiting isn’t without risk, since your home’s value or local market conditions could shift. In some markets, tighter lending standards or shifts in demand could make equity borrowing more restrictive over time. Unexpected expenses can also come up. If a sudden repair or financial emergency hits, you might be forced to borrow during a less favorable window.

Waiting can save you money, but only if market conditions move in your favor and your financial needs stay predictable.

If you haven't taken out a home equity loan or HELOC yet, use our home equity tool below, powered by Bankrate, to compare rates you can get today:

Common mistakes homeowners make when tapping equity and how to avoid them

One of the biggest mistakes homeowners make when borrowing against their home is using the funds for non-essential or short-lived expenses such as vacations, gifts or lifestyle upgrades. While tempting in the moment, these uses don’t build long-term value and often leave borrowers with years of additional debt.

Another common misstep is assuming HELOC rates will continue to fall. Variable-rate credit lines can be helpful for flexibility, but they’re also unpredictable. If rates rise again, monthly payments can climb quickly.

Homeowners also frequently borrow more than they truly need, simply because lenders approve larger credit limits. Taking the maximum available amount can put unnecessary pressure on your budget and increase overall risk.

To avoid these pitfalls, focus equity borrowing on essential financial goals like necessary home improvements or consolidating high-interest debt, choose the loan structure that aligns with your risk tolerance, and borrow only what’s needed to meet your objective.

Practical advice for homeowners evaluating their options

If you’re weighing whether to pull equity now or wait until 2026, take these steps to make a sound decision:

1. Calculate your current equity (realistically)

Review your latest mortgage balance and compare it with recent comparable sales in your area. Don’t rely solely on automated valuation tools, since they can be overly optimistic.

2. Clarify your purpose

Equity borrowing makes the most sense when it strengthens your financial health: Increasing home value or lowering interest costs. If the purpose is discretionary, it’s better to pause.

3. Shop aggressively for a lender

Rates, closing costs and terms vary widely. Don’t automatically default to your current mortgage provider. A difference of even 0.25% can significantly affect long-term cost. It pays to shop around for a mortgage lender, since each lender might offer different rates, fee structures and support.

4. Choose the right loan structure for your personality and goals

A HELOC works well for gradual projects or flexible cash needs because you can draw funds as you go.
A home-equity loan suits borrowers who want predictable monthly payments and a fixed repayment timeline.

5. Run the numbers before committing

Estimate monthly payments, total interest costs and the potential tax benefits. Under current IRS rules, interest on home-equity debt is tax-deductible only when the funds are used for qualifying home improvements. That’s worth factoring into your calculations.

Tapping your home equity before 2026 can be a strategic way to unlock lower-cost financing, but only if the timing aligns with your broader financial goals. Borrowing now offers certainty and flexibility, especially for homeowners facing immediate needs or high-interest debt.

Waiting, meanwhile, might yield better rates, but also carries risks tied to home prices, market conditions and unforeseen expenses.

The right move depends on your financial stability, long-term plans and comfort with rate fluctuations. Approach the decision carefully, run the numbers, and choose the option that delivers the best balance of cost, stability and opportunity for your household.

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Whether that move really makes a difference depends on from where you're coming. Even the cheapest city on the list is only paying 8.3% less than the national average on groceries.

If you're moving from San Francisco or another city with the most expensive groceries, the price difference at the store will be more dramatic. But if your current town is close to the national average already, you might hardly notice a change in your monthly spending.

With that in mind, I analyzed the latest grocery pricing data from the Council for Community and Economic Research to find the cities where people pay the least to feed their families.

I then compared those grocery budgets to median household income data from the U.S. Census Bureau's American Community Survey 5-Year Data (2009-2023).

Take a look at which cities are spending the least to keep their fridges stocked.

Cheap groceries aren't always affordable groceries

Six of the 11 cities with the cheapest grocery prices are in Texas, meaning you'll spend less at the store just about anywhere you go in the Lonestar state. But cheap doesn't always mean affordable. With a wide variation in incomes from one Texas town to the next, groceries are a much bigger strain on the budget in some parts of the state than others.

That's because prices alone can't tell you how affordable groceries would be if you moved to one of these cities.

Financial experts typically suggest you keep your grocery budget at 15% or less of your take-home pay. When you factor in median household income, not one of the 11 cities below met that recommendation, despite paying less than the national average to put food on the table.

1. Grand Forks, North Dakota

• 8.3% cheaper than national average
• Median household income: $72,369
• Average monthly grocery spend: $1,143
• Grocery spend to income: 18.95%

Residents of Grand Forks are enjoying the lowest grocery bills in the United States. With a median household income of $72,369, groceries still take up more than 15% of their household income, despite being the cheapest in the country. However, food is more affordable here than it is in most other cities on this list.

2. Waco, Texas

• 7.2% cheaper than national average
• Median household income: $56,548
• Average monthly grocery spend: $1,156
• Grocery spend to income: 24.53%

In Waco, people pay 7.2% less than the national average to eat. But with a dramatically lower median household income compared with Grand Forks, groceries still strain the budget here. The typical household spends 24.53% of its income on food.

3. Minot, North Dakota

• 7% cheaper than national average
• Median household income: $77,431
• Average monthly grocery spend: $1,160
• Grocery spend to income: 17.98%

Minot might only rank third place when looking at the prices on store shelves, but the North Dakota city ranks first among the cities on this list for affordability.

With a median income of $77,431, the typical Minot household spends less than 18% of earnings on groceries. That's still higher than the 15% recommended cap — but it's a lot less strain on the wallet than many other cities on this list.

4. Harlingen, Texas

• 7% cheaper than national average
• Median household income: $41,756
• Average monthly grocery spend: $1,159
• Grocery spend to income: 33.31%

With a median household income of $41,756, Harlingen has the dubious distinction of being the least affordable place to buy groceries, despite having the fourth-lowest prices in the nation. A typical household here will spend more than 33% of their income just to put food on the table.

5. Lawton, Oklahoma

• 6.9% cheaper than national average
• Median household income: $55,506
• Average monthly grocery spend: $1,161
• Grocery spend to income: 25.09%

A typical household in Lawton earns $55,506 per year and spends a little more than 25% of that on groceries. Even with prices averaging about 6.9% below the national average, the lower median income still makes those prices unaffordable compared with areas with higher incomes.

Oklahoma had a 4.5% statewide grocery tax, but eliminated it in 2024, which state lawmakers said could save each family hundreds. However, shoppers can still face sales tax, including local taxes.

6. McAllen, Texas

• 6.9% cheaper than national average
• Median household income: $60,907
• Average monthly grocery spend: $1,160
• Grocery spend to income: 22.85%

McAllen residents pay slightly more than their Harlingen neighbors to the east but are also earning about $19,000 more per year. While they're still technically spending more of their income on groceries than experts recommend, they're not straining their budgets nearly as much as Harlingen residents.

7. San Marcos, Texas

• 6.7% cheaper than national average
• Median household income: $48,091
• Average monthly grocery spend: $1,163
• Grocery spend to income: 29.01%

McAllen's neighbors to the north are in a similar boat as Harlingen. Residents here pay 6.7% below average at the store. But with a median income of $48,091, those low prices still take up more than 29% of the typical household's income.

8. Temple, Texas

• 6.6% cheaper than national average
• Median household income: $71,931
• Average monthly grocery spend: $1,164
• Grocery spend to income: 19.42%

In Temple, residents enjoy grocery prices that are 6.6% cheaper than the rest of the country. With a median household income of $71,931, they also don't have to stretch their budgets thin to keep their families fed.

Of the six Texas cities on this list, Temple ranks first on affordability, with groceries taking up just 19.42% of income.

9. Ardmore, Oklahoma

• 6.5% cheaper than national average
• Median household income: $52,954
• Average monthly grocery spend: $1,166
• Grocery spend to income: 26.43%

Groceries in Ardmore are priced 6.5% below the national average, but the typical household still struggles to afford those lower prices. With a median income of $52,954 and an average monthly spend of $1,166, residents put more than 26% of their earnings toward food.

10. Corpus Christi, Texas

• 6.2% cheaper than national average
• Median household income: $66,967
• Average monthly grocery spend: $1,169
• Grocery spend to income: 20.95%

This coastal city pays 6.2% less than the rest of the United States to put food on table. With a median income of $66,967, groceries aren't exactly cheap, but the typical household here is still faring better than some other towns in Texas.

11. Joplin, Missouri

• 6.1% cheaper than national average
• Median household income: $51,154
• Average monthly grocery spend: $1,171
• Grocery spend to income: 27.47%

Coming in at 11th place, Joplin pays 6.1% below the national average at the grocery store. On average, a typical household here will spend $14,052 per year to keep food in the pantry, which represents more than 27% of that household's income.

One other point to note is that Missouri is one of the 10 states that still taxes groceries, with a 1.225% food sales tax — and cities and counties can also charge their own tax rates. Joplin has a sales tax rate of 3.125%, although some areas of the city have lower rates due to special taxing districts.

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Answer: There can be benefits to carrying a mortgage rather than paying it off with a lump sum of cash. For one thing, if you itemize on your tax returns, you may be able to lower your IRS bill via the mortgage interest deduction. And if you have a relatively low interest rate on your mortgage, it could pay to invest your money elsewhere at a higher return.

On the other hand, at the end of the day, a mortgage is a form of debt. And you may not love having debt in retirement.

If you have a $360,000 mortgage on a vacation home worth $1.2 million, you clearly have plenty of equity in that property. But you may be tired of having to make monthly payments on that loan.

If you’re on the hook for a $45,000 required minimum distribution (RMD) you don’t need for other expenses, you may be inclined to use it to pay down your mortgage and shed that loan more quickly. But is that a good idea?

It’s a matter of liquidity

The amount of interest you’re paying on your mortgage might help dictate whether it makes sense to use an RMD to pay off that loan sooner. But regardless of your mortgage’s interest rate, as long as it’s not astronomical, you’ll want to consider how putting more money into your home will impact your overall liquidity.

“When I walk clients through decisions like this, we look at which option leaves them better positioned for the unknown,” says Drew Lunt, founder and adviser at Scratch Capital. “Investing the after-tax RMD or using it for QCDs can preserve liquidity and allow total-return compounding to do the heavy lifting.”

Matt Hylland, financial planner at Arnold and Mote Wealth Management, agrees.

“Using an unneeded RMD for proceeds to accelerate the paydown of the mortgage can be a great way to guarantee some interest savings in the long run,” he says.

But first, he says, you must make sure you have enough liquid assets and savings as a buffer.

As Hylland explains, “Building up additional equity in a home can pay off eventually, but it will be expensive to access that equity if it is needed before selling the home.” This especially holds true in today’s borrowing environment, where interest rates remain stubbornly high.

Hylland suggests evaluating the interest rate on other safe investments, like money markets and Treasury bills, to see how it compares to your mortgage rate. If you could earn a comparable interest rate outside of paying down the mortgage, the benefit of greater liquidity may ultimately be a better option.

As Lunt cautions, “A vacation home is already an illiquid, concentrated asset. Adding more equity may feel productive, but it can reduce resilience when unexpected repairs, rising insurance costs, or life changes inevitably show up.”

There are other ways to maximize an RMD

If you don't need your upcoming RMD for living expenses but you're not sure you want to tie another $45,000 up in a vacation home, there are other ways to use that money productively.

Lunt suggests looking at qualified charitable distributions (QCDs) if you're eager to reduce your tax burden. You can also invest your RMD in a taxable brokerage account that can generate income.

Another option, says Hylland, is to use the RMD to pay the tax bill on a Roth conversion that reduces or eliminates future RMDs.

"This strategy will help reduce future year RMDs, potentially saving taxes for the rest of their life, and give this person additional money that will grow tax-free in a Roth IRA, which may ultimately be much more valuable than saving some interest on their mortgage," he explains.

Think about what gives you the most peace of mind

Money you don't need for pressing expenses in retirement can be used to serve another key goal — improving your sense of financial security. That's why you may want to base your decision on what gives you the most peace of mind, provided you've done a personal liquidity analysis first (either on your own or with the help of a financial adviser).

As Lunt says, "Paying down the loan can legitimately reduce financial stress and create more stability."

However, if putting more money into an illiquid asset will introduce more financial fragility over time, then it may not be worth it. You'll need to think about what's best for you in a broad sense — not just in the context of dealing with this year's RMD.

"The right choice here isn’t about maximizing short-term math," Lunt says. "It’s about increasing long-term optionality and making sure [you] can adapt when life doesn’t follow the plan."

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Unlike income taxes, which often decline in retirement, property taxes are based on the value of your home — and in many parts of the country, assessed values have skyrocketed in recent years. Median property taxes rose by an average of 10.4% between 2021 and 2023, according to an analysis of the latest data available by LendingTree, an online marketplace for consumer loans. The median property tax in 2023 was nearly $3,000 ($2,969), but median property taxes in 50 metropolitan areas ranged from $1,091 to nearly $10,000, according to LendingTree.

Before writing a check for your next property tax bill, make sure you take full advantage of property tax relief programs offered by your state or locality. While more than 9 million Americans likely qualify for property tax relief, only about 8% apply for it, according to the AARP. “Many aren’t aware these programs exist or assume they’re not going to qualify,” says Nicole Heckman, vice president of well-being for the AARP Foundation.

The types of property tax relief available vary, not only by state but by individual counties and jurisdictions. Many states and jurisdictions offer expanded relief to homeowners who are 65 or older; some offer breaks to homeowners who are 61 and older. Veterans and residents with disabilities may also qualify for a reduction in their property taxes. While eligibility is often income-based, the income thresholds “can be pretty expansive,” Heckman says, so don’t assume you earn too much to qualify. In New Jersey, for example, homeowners with incomes of up to $500,000 are eligible for reimbursement of a portion of their property tax bill.

Tax relief isn’t automatic. In most cases, you must fill out an application and file it by a deadline set by your locality or state. Some jurisdictions require you to apply in person. Other states and localities allow you to apply online, but that can be challenging for older adults who don’t have broadband internet, Heckman says.

The AARP Foundation’s Property Tax Aide program, now in its fifth year, allows homeowners to research more than 140 programs in 50 states and Washington, D.C. Users can find details on eligibility, deadlines and where to get help. The average amount of relief provided through the program is $400, but some users have saved up to $1,000, Heckman says. Many states allow eligible homeowners to apply for up to three years of back tax relief, she says. “That can be a significant credit or refund.”

Some types of relief states and localities offer homeowners:

1. Tax credits and refunds

More than a dozen states offer property tax credits or refunds to eligible older adults in amounts ranging from $250 to $2,730. Pennsylvania provides rebates ranging from $380 to $1,000 for eligible older and disabled residents. Tennessee refunds all or a portion of property taxes paid by eligible residents.

Minnesota provides two types of property tax refunds: one based on homeowners’ income and the amount of their property taxes, and another based on how much residents’ property taxes have increased. (Some residents qualify for both, and the program isn’t limited to older adults.) Cindy Rieck, 68, of Pequot Lakes, Minn., whose home has nearly doubled in value since she purchased it in 2007, says she received a refund of $1,200 in 2024.

2. Expanded homestead exemption

Property taxes are based on the assessed value of your home, which may differ from its appraised or market value. A homestead exemption lowers the assessment, thus reducing your property tax bill. Most states offer some kind of homestead exemption for residents, but many states provide an additional homestead exemption for older adults.

Florida, for example, allows residents to exempt up to $50,000 of their home’s assessed value from property taxes (which will increase with the rate of inflation starting in 2025), but jurisdictions in the state have the option of providing an additional $50,000 exemption to eligible homeowners 65 and older.

Texas recently increased its homestead exemption to $140,000 for all residents. The state provides an additional $60,000 exemption for residents age 65 or older, for a total combined homestead exemption of $200,000. Texas now allows individual jurisdictions to add $3,000 to that amount.

3. Assessment freeze

In Arizona, homeowners ages 65 or older who have lived in their primary home for at least two years and meet income limits can have their property’s valuation frozen for three years. New Jersey has a “senior freeze” program that reimburses property tax increases for eligible residents who have owned their homes for at least three years.

4. Tax deferral

Illinois allows eligible homeowners 65 and older to defer up to $7,500 of property taxes on their principal residence. California, Maine, Minnesota, Vermont and Washington also allow eligible older adults to defer property taxes.

If you sign up for deferral, the state or locality will place a lien on your home; the taxes must be paid, usually with interest, after you die or sell the home. That’s important to consider when planning your estate. If your heirs sell the home, the back taxes will reduce the amount they’ll receive from the proceeds, and if they want to keep it, they’ll be on the hook for the taxes you deferred. “If you can afford it, you may decide you’d rather pay the tax now and not have something your heirs will have to worry about when they sell the property,” says Jared Walczak, vice president of state projects at the Tax Foundation in Washington, D.C., a tax-policy research organization.

Other options to cut your tax bill

Applying for property tax relief is just one way to lower your tax bill. Other options that may be available to you:

Claim a deduction
The One Big Beautiful Bill Act, signed into law in July, allows homeowners to deduct up to $40,000 in state and local taxes, up from a cap of $10,000. The provision takes effect in 2025 and expires in 2029. The legislation also expanded the standard deduction for eligible taxpayers 65 and older, so for many older adults, claiming the standard deduction will still provide the lower tax bill. However, if you live in a high-tax state and have other deductible expenses — large charitable contributions, for example — it’s worth running the numbers with your tax preparer or on a tax software program to determine whether you should itemize on your 2025 tax return.

Challenge your property tax bill
If you believe your assessment was inaccurate or outdated, you may be able to lower it by filing an appeal. Review your property’s record card, usually available on your locality’s website or by request. If you find an obvious error — four bedrooms instead of two, for example — your assessor may agree to lower the assessment on the spot.

If the information on your property’s record card is correct but you believe your assessment was higher than those for comparable homes in your neighborhood, you can use that information to file an appeal. Check your local government’s website for deadlines and procedures. Realtor.com offers a tool that will provide you with an estimate of the market value of your home, along with estimated values of other homes in your neighborhood. The tool is free but you must create an account to use it.

Note: This item first appeared in Kiplinger Retirement Report, our popular monthly periodical that covers key concerns of affluent older Americans who are retired or preparing for retirement. Subscribe for retirement advice that’s right on the money.

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Driven by a projected 20% rise in wholesale natural gas prices for 2026, the cost of keeping your home toasty could rise sharply, depending on where you live and the type of fuel you use.

Electricity is expected to lead the price hikes, with double-digit jumps in some parts of the country, followed by more modest increases in the cost of residential natural gas. The price of home heating oil, though still the most expensive way to keep a house warm, is expected to remain flat or even drop in some areas.

“Even with temperatures forecast to mirror last winter, home heating costs are expected to rise about 10% overall, as utilities pass higher fuel costs directly to consumers,” says Mark Wolfe, executive director of the National Energy Assistance Directors Association.

How can you ease the pinch? “The smartest and cheapest thing homeowners can do is focus on efficiency first,” says Laura Bowler, design lead with Ramboll, a sustainable architecture and engineering consulting firm. “Simple steps can make a big impact.”

Here are some to consider.

1. Seal air leaks

Check your windows and doors for leaks that let in cold air and moisture. For the windows, you can use rope caulk (about $6 at your local hardware store) to seal any openings or damage to sealant you find, says Kriss Swint, marketing director with Westlake Royal Building Products in Columbus, Ohio.

For the doors, you can install a door sweep, a type of weather stripping that plugs the opening at the bottom ($10 to $20). Reducing these drafts can cut your energy bill by 5% or more, according to the U.S. Department of Energy (DOE).

2. Unblock vents

Check around your home to make sure your vents aren’t blocked by furniture, which wastes heat and forces your system to work harder. Don’t want to rearrange couches and beds? You can instead connect a small plastic extender or deflector to the vents ($7 to $20), which can steer warm air to the areas of your home that need it most.

3. Use a smart or programmable thermostat

To save on heat while you’re out of the house, consider installing a programmable thermostat, which lets you set an automatic schedule for adjusting the temperature.

Turning down your thermostat by 10% to 15% for eight hours a day can reduce your bill by 10%, according to the DOE. Or spring for a smart thermostat linked to your cell phone that will track your location and daily patterns, then adjust the temperature in your home accordingly. A basic programmable model is about $50; a smart thermostat goes for around $100 to $200.

Below are a few top-rated smart thermostats from Amazon:

4. Insulate the attic

“Roughly 25% of heat loss occurs in the attic,” says Swint. To help prevent that, add more insulation, such as fiberglass, wool, or cotton, between the attic joints to trap heat. “If you’re a DIYer, this project should take a weekend,” says Swint.

'Average cost: $1,500 to $3,500, depending on the size of your attic and the material used.

5. Replace old heating systems

This could be an ideal time to spring for a new furnace or boiler, while some tax credits are still available for energy-efficient upgrades. One such credit, which expires at the end of 2025, can cover 30% of your energy-efficient home upgrades, for a total savings of up to $3,200. You may also qualify for state and local rebates, depending on where you live.

While you’re at it, also consider replacing an old attached garage door, which can be a significant source of heat loss. New versions have more insulation and improved sealing.

A bonus: Sellers recouped nearly double the average $4,513 they paid for a garage door replacement in 2024.

For more-targeted guidance, consider working with a professional home-energy auditor. “An audit will help identify where heat loss is happening and what improvements make the most sense,” Bowler says. For information on finding an auditor, visit energy.gov/energysaver/professional-home-energy-assessments.

Note: This item first appeared in Kiplinger Personal Finance Magazine, a monthly, trustworthy source of advice and guidance. Subscribe to help you make more money and keep more of the money you make here.

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Here we highlight five wealthy small towns, along with their attributes, amenities, hospitals and access to major urban centers.

Retirees should conduct an honest self-evaluation of their physical strengths and limitations, as well as their tolerance for living in a relatively remote (as opposed to more accessible) corner of the country. Your neighbors may have private jets; you may not be as well-positioned.

1. Martha's Vineyard, Massachusetts

The vibe. This sprawling, scenic island located south of Cape Cod has long been a magnet for the Clintons and the Obamas, but it’s not just a seasonal retreat for boldfaced names. In little more than a decade since 2010, the year-round population has doubled to more than 20,000 — but the summer crowds swell that number by a multiple of 10.

The widest sandy strands of this triangular land mass are in the south, where people wave to strangers from their beach towels (the Vineyard is known for its friendliness). The epicenter of the island’s activity and charm is historic Edgartown.

The island has a good share of historic sights, art galleries, cute general stores, indie shops (including bookstores, boutiques and ice cream parlors) and stunning coastal bluffs. Artists, writers and musicians abound, and concerts at the historic Tabernacle may include local talent or national acts.

Each town has its own character, from the mansions of West Chop to the cottages near the Menemsha fishing village. The historic village of Oak Bluffs, with its charming gingerbread homes, has long been the summer destination of the Black elite.

There is a strong commitment to environmental conservation on the island, resulting in ample hiking and biking trails and coastal protection.

Some areas of Martha's Vineyard, like Edgartown and other low-lying coastal areas, face a "major" flood risk.

Healthcare. Martha’s Vineyard Hospital is located in Oak Bluffs in the north of the 96-square-mile island. A medivan transports seniors and patients with disabilities from the Vineyard to Boston hospitals once a week for $40. For emergencies that the hospital can't handle, patients may be airlifted to hospitals in Boston.

Median home sale price. $1.48 million in October 2025, according to Redfin.

Access. Martha’s Vineyard Airport is served by major airlines such as Delta, American and JetBlue. You can reach Boston by taking a ferry (which can transport your car) and then driving for two hours. A passenger ferry can get you from New York City to the Vineyard in about five hours during the high season.

2. Saratoga Springs, New York

The vibe. A longtime retreat from New York City, Saratoga Springs has a population of more than 28,000 people. It attracts an interesting and eclectic crowd: Some visit for the city’s namesake mineral springs, while thoroughbred horse racing enthusiasts are drawn to the Saratoga Race Course. For the literary-minded, the famed artists’ and writers’ retreat, Yaddo, is an ideal destination. The well-regarded Skidmore College lends the historic city a college-town atmosphere, while offering readings and musical and visual arts events open to the public.

Though Saratoga Springs' town motto is "Health, History and Horses," you could add "great food" to the slogan, despite the lack of alliteration. As part of the Hudson Valley, the town is near many farms and breweries. In addition, the area is ideal for hiking and boating, and is about one hour from the Hudson River.

Healthcare. Saratoga Hospital is affiliated with Albany Med Health System.

Median home sale price. $759,900 in October 2025, according to Redfin.

Access. By car, Saratoga Springs is a 45-minute drive from Albany and more than three hours from Manhattan. By express train, Saratoga Springs is about four hours from Moynihan Train Hall (adjacent to Penn Station), New York. It's also on Amtrak's Adirondack Line, known for being one of the most beautiful train routes for fall foliage.

3. Telluride, Colorado

The vibe. Arguably the loveliest resort town in Colorado, Telluride is a haven for skiers and winter sports enthusiasts. Still, summers are popular, with rafting, swimming, tubing, mountain biking, fishing, and rock climbing available. Surrounded by mountains on all sides, the town features a historic center listed on the National Register of Historic Places.

If festivals are your thing, then Telluride could be a great fit. The annual Telluride Film Festival has been around for more than 50 years and has only grown in prestige. There are 14 festivals each year celebrating Bluegrass, Americana and Blues music, wine, yoga and more. The retiree-friendly town offers free bus and gondola services, reducing reliance on car travel.

The town has an extreme flood risk, so be sure to check risk maps before you purchase a property.

Healthcare. The nearly 50-year-old Telluride Medical Center offers 24-hour trauma and emergency services.

Median home sale price: $1.38 million in October 2025, according to Redfin.

Access. Telluride, with a population of around 2,500, is somewhat remote, though it contains a regional airport. Montrose Regional Airport (1.5 hours away) is the better, more equipped option in some cases. Denver is a six-hour drive away; even Albuquerque, New Mexico, is a bit closer. Retiring or relocating to Telluride is best for those who are fit and generally healthy. Very wealthy Telluride residents are opting for private planes.

4. Carmel-by-the-Sea, California

The vibe. One of the most enchanting coastal spots on the Monterey Peninsula, the remote town of Carmel-by-the-Sea has a population of over 3,000. Human-scale Ocean Avenue counts as the main street, and it’s a beauty, dotted with alfresco restaurants and cottage hotels. Walking or driving along the roads that branch off from Ocean Avenue is a delight, with rises, falls and twists among the Spanish colonial and storybook homes.

At the end of Ocean, you’ll find stunning Carmel Sunset Beach, which is broad and gently sloping, a favorite for sunbathers, picnickers, and surfers. History and culture abound, and include the 18^th-century Carmel Mission Basilica, the Sunset Center for live entertainment, the Carl Cherry Center for the Arts, and the Carmel Heritage Society. Nearby 17-Mile Drive ranks as one of the finest coastal routes in the country and the exalted Pebble Beach golf courses and resorts are just minutes away. The serpentine Pacific Coast Highway, which leads south to Big Sur, is renowned for its beauty, but be sure to check for road closures. Note that Carmel-by-the-Sea's wildfire risk is considered "major."

Health care. Nearby hospitals in and around the Monterey Peninsula include the Community Hospital of the Monterey Peninsula and Pacific Grove Healthcare Center.

Median Home Sale Price. $2.481 million in October 2025, according to Redfin.

Access. Carmel is on the Central Coast of California, about 2.5 hours south of San Francisco and its international airport.

5. Palm Beach, Florida

The vibe. Palm Beach, positioned in the northern section of the tri-county region of Great Miami, is a tiny and very exclusive (9,000 year-round residents), beach community located on a sandy, pretty barrier island. Anchored by the legendarily ornate Breakers Palm Beach oceanfront resort, the town is rife with palatial homes and dozens of billionaires (and yes, Mar-a-Lago).

Local hotspots include bougainvillea-lined Worth Avenue, with its high-end boutiques (apparel and household goods), eateries, fountains and pedestrian vias. Swifty’s at the Colony Palm Beach hotel is one of the loveliest dining venues in town, but don’t miss Buccan, Bice, Renato’s and buzzy outposts of Manhattan favorites like Sant Ambroeus and La Goulue.

One major downside of Palm Beach is its climate risk. Over 90% of properties are at risk of flooding in the next 30 years, according to First Street.

Healthcare. Good Samaritan Medical Center and St. Mary’s Medical Center are across the bridge in the more bustling and commercial West Palm Beach.

Median home sale price. $5.5 million in October 2025, according to Redfin.

Access. In addition to the resources in West Palm, Palm Beach is a 2.5-hour drive to Miami, with Boca Raton and Fort Lauderdale along the route. West Palm Beach, Fort Lauderdale and Miami are home to major international and executive airports. The Tri-Rail Line connects West Palm Beach to local airports and nearby towns.

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Daniel Goodwin, chief investment strategist at Provident Wealth Advisors, often writes about real estate investing vehicles such as 1031 exchanges and Delaware statutory trusts (DSTs).

Recently, he wrote about how DSTs can shift your wealth into a higher gear.

If you read that article, then we bet you'll ace this quiz. We even threw in some easy questions for you. Let's see how you do!

Related Content From Adviser Intel

Here are some other articles about DSTs by Daniel Goodwin:

• Six Risks of Delaware Statutory Trusts in 1031 Exchanges
• DST Exit Strategies: An Expert Guide to What Happens When the Trust Sells
• Delaware Statutory Trust: A Viable Alternative to Debt Replacement

Earlier this month, President Donald Trump released a graphic on his social media platform Truth Social titled “Great American Presidents.” Inside the graphic were the words “30-Year Mortgage” above a photograph of former President Franklin D. Roosevelt, and “50-Year Mortgage” above a photo of Trump.

The post sparked debate as industry experts and elected officials weighed in on a proposed 50-year loan term to help first-time buyers afford a home.

But would such a proposal actually help or hurt a homebuyer’s financial situation? And how would a 50-year mortgage affect another pain point for homeowners: Taxes?

Read on.

Are 50-year mortgages coming?

When homeowners buy a house, they typically secure a 30-year mortgage. This loan lifecycle follows a process called amortization, where the borrower pays fees and interest first, then slowly pays down the principal balance over time. Ideally, after 30 years, the homeowner owns the house.

By stretching the loan term from 30 to 50 years, the buyer effectively pays less every month for the same principal balance.

Consequently, on the surface, a 50-year mortgage might seem to help a first-time homebuyer afford a home, as shown by Fannie Mae’s mortgage calculator:

• A 30-year mortgage on a $200,000 home with a 5% down payment and 6% interest rate could result in a monthly mortgage payment of $1,512.
• A 50-year mortgage home with the same price and terms as above could lead to a monthly mortgage payment of $1,373.
• Compared to a 30-year term, the proposed 50-year mortgage would result in a monthly payment savings of approximately $139 for the homebuyer.

Director of the Federal Housing Finance Agency, Bill Pulte, who reportedly proposed the idea to Trump, called the proposal “a complete game changer,” while sharing Trump’s post on X. Pulte later added that the Trump administration is developing a “WIDE arsenal of solutions” to the housing affordability crisis.

Home affordability has become a recent issue for the Trump administration, as housing prices have skyrocketed more than 50% over the last five years.

And those who can afford a house spend an average of 39% of their income on housing expenses — well over the 30% recommended amount given by financial experts, according to Redfin. Yet some elected officials and industry experts claim the 50-year mortgage proposal could boomerang, leading to significantly higher home costs over time and even threatening future generational wealth.

50-year mortgage Trump proposal

A 50-year mortgage may yield slightly lower monthly payments than a 30-year term. But the total loan cost would be staggering, according to the latest LendingTree analysis using a $500,000 mortgage and a 6.1% interest rate:

• For a 30-year fixed loan, a homebuyer would pay $590,791 in interest over the life of the loan.
• For a 50-year fixed loan, a homebuyer would pay over $1.1 million in interest alone.
• Effectively, the amount of interest you pay on a 30-year vs. a 50-year loan would be more than double, even though your loan only increased by 20 years.

“This is not a good idea,” remarked Richard Green, a professor at the University of Southern California’s Marshall School of Business, who told CNN, “The monthly payment savings would be really small. At the same time, you’re putting people at risk, because it takes a really long time for them to start paying down their loan.”

Just days after the proposal, Trump told Fox News in an interview, “It’s not even a big deal,” and “All it means is you pay less per month. You pay it over a longer period of time. It’s not like a big factor.”

Meanwhile, the average age of a new homebuyer has increased to a record-breaking 40 years old, according to the National Association of Realtors.

If the first-time buyer purchases a home at that age, there’s a good chance they could be dead before their 50-year mortgage matures. Future generations could be on the hook for paying the loan, which means less wealth would be passed down to younger generations.

"I don’t like 50 year mortgages as the solution to the housing affordability crisis,” wrote Rep. Marjorie Taylor Greene (R-Ga.) on X. “It will ultimately reward the banks, mortgage lenders, and home builders while people pay far more in interest over time and die before they ever pay off their home. In debt forever, in debt for life!"

In the meantime, Opendoor’s CEO, Kaz Nejatian, praised the idea on X. “50 year mortgage is probably the most pro-homeowner government policy of the last two decades.”

50-year mortgage vs. 30-year mortgage: Interest tax deduction

Some may wonder whether the cost of a 50-year mortgage could be offset through tax savings. After all, homeowners may take advantage of the mortgage interest deduction (MID) if they itemize their federal returns.

• MID allows you to deduct up to $750,000 on qualifying loans after 2017 (before that date, the limit is $1 million).*
• Interest paid on a proposed 50-year loan would be higher compared to interest paid on a 30-year loan (even though your monthly mortgage payment would be lower).
• Because of this, your annual MID could be potentially higher on a hypothetical 50-year loan compared to a 30-year mortgage.
• However, because the MID is capped at $750,000 for new loans, you might not be able to recoup all your interest paid over the life of the loan (plus you’d have to itemize your federal taxes every year just to claim it instead of the standard deduction).
• And since the average homeowner typically sells their home after 12 years, you likely wouldn’t see a more advantageous tax benefit from the mortgage tax deduction than on a 30-year loan.

And there’s home equity risk, too. The principal is paid down slowly on a 50-year mortgage, which means the homeowner's equity builds at a significantly slower rate. This exposes the homeowner to a greater risk of potential home price declines, or even “negative” equity if the housing market dips.

*Note: The MID limits for married filing separately couples are lower than other filing statuses.

Is a 50-year mortgage a good idea legally?

Before anything else, the Trump administration would need to overcome a legislative hurdle to enact a 50-year mortgage.

The Dodd-Frank Wall Street Consumer Protection Act, which was designed (in part) to protect homebuyers after the 2008 housing financial crisis, doesn’t currently embrace 50-year mortgages.

So if a 50-year loan were issued, it would likely be “non-qualified,” meaning it wouldn’t be backed federally. The lack of federal assurance increases lender risk, which would likely increase the interest rate for the buyer.

Yet a policy change might not be off the table.

According to ABC News, a White House official said that the administration is "always exploring new ways to improve housing affordability" and will announce any official policy changes directly.

So stay informed and stay tuned.

Read More

• About 40% of Heirs Say They Can’t Afford an Inherited Home
• Ten Tax Breaks for Homeowners and Homebuyers in 2025
• Are Trump Tariffs Legal? The Supreme Court and What’s at Stake

These platforms have attracted hundreds of thousands of investors by simplifying property investment and handling all management responsibilities.

With more than a million registered investors, such platforms demonstrate the appetite for accessible real estate investment opportunities.

Kiplinger's Adviser Intel, formerly known as Building Wealth, is a curated network of trusted financial professionals who share expert insights on wealth building and preservation. Contributors, including fiduciary financial planners, wealth managers, CEOs and attorneys, provide actionable advice about retirement planning, estate planning, tax strategies and more. Experts are invited to contribute and do not pay to be included, so you can trust their advice is honest and valuable.

However, for accredited investors with substantial assets, these retail-focused platforms represent a fundamental compromise.

Investment caps, share limits, concentration in residential real estate and a lack of sophisticated tax-planning tools create inherent limitations that prevent serious wealth-building.

While these platforms can serve an important role for smaller investors, they pale in comparison to the institutional-grade opportunities available through Delaware statutory trusts (DSTs).

The Delaware statutory trust advantage

DSTs represent the pinnacle of passive real estate investing for accredited investors, providing access to institutional-quality assets that individual investors could never acquire independently.

These sophisticated investment vehicles allow multiple investors to pool their capital and acquire professionally managed, institutional-grade real estate offerings throughout the United States.

The fundamental structure of DSTs creates compelling advantages that retail platforms simply cannot match. With minimum investments typically starting at $100,000, DSTs immediately distinguish themselves by providing access to assets worthy of substantial capital deployment.

This higher barrier to entry enables participation in institutional-quality properties including large multifamily complexes, medical office buildings, industrial warehouses and Class A commercial properties valued in the hundreds of millions.

Institutional scale and asset quality

The asset quality differential between retail platforms and DSTs is profound and transformative. DSTs provide fractional ownership in institutional-grade assets often exceeding $100 million in value, with some offerings providing access to stabilized properties worth several hundred million dollars.

This scale advantage translates into superior diversification and risk management that smaller residential properties cannot achieve.

A single DST might own a portfolio of 15 Walmart stores across multiple states, a collection of Class A apartment communities in high-growth markets or a diversified portfolio of medical office buildings leased to health care systems.

Such diversification provides stability and risk mitigation that comes from institutional-level asset management.

DST properties also benefit from economies of scale and operational efficiencies that create competitive advantages. Large commercial properties typically feature long-term leases with credit-worthy tenants, professional property management teams with specialized expertise and operational systems that smaller residential properties cannot match.

This institutional approach consistently produces more stable cash flows and superior long-term performance.

Superior tax optimization through 1031 exchanges

Perhaps the most significant advantage DSTs offer accredited investors lies in sophisticated tax optimization, particularly through 1031 exchanges.

Revenue Ruling 2004-86 established DSTs as qualifying "replacement property" for 1031 exchanges, enabling investors to defer capital gains taxes indefinitely while building wealth through real estate.

For accredited investors with appreciated real estate holdings, this capability represents a wealth preservation tool of extraordinary value.

An investor who owns rental properties with substantial appreciation can execute a 1031 exchange into multiple DSTs, achieving superior diversification while deferring potentially hundreds of thousands in capital gains taxes.

This tax deferral preserves capital that continues working within the investment, compounding wealth over time.

DSTs provide the same tax advantages of direct real estate ownership, with depreciation and amortization passed through to investors based on their proportionate share.

The ability to execute subsequent 1031 exchanges from DST to DST creates a powerful wealth-building cycle that can span decades, allowing investors to continually upgrade their real estate holdings while preserving tax efficiency.

This tax optimization capability represents millions in potential wealth preservation for high-net-worth individuals over their investment lifetimes, creating compounding advantages that retail platforms cannot provide.

Efficient capital deployment for substantial investors

DSTs offer rational capital deployment solutions for accredited investors with significant assets to allocate.

Rather than fragmenting large investment amounts across dozens of small properties, investors can efficiently deploy capital across carefully selected institutional-quality assets that provide meaningful diversification and professional oversight.

A $2 million real estate allocation might be strategically divided among three or four DSTs representing different property types, geographic markets and economic drivers.

This approach achieves superior diversification while maintaining focus on institutional-quality assets managed by experienced professionals with proven track records.

Looking for expert tips to grow and preserve your wealth? Sign up for Adviser Intel (formerly known as Building Wealth), our free, twice-weekly newsletter.

The efficiency extends beyond initial investment to ongoing management and eventual exits. Professional DST sponsors handle all operational aspects while providing regular reporting and strategic guidance, eliminating the complexity that comes with managing multiple smaller investments.

Professional management and sponsor quality

DST investors benefit from sponsor expertise specifically focused on institutional real estate investment and management.

These sponsors often manage billions in assets and possess decades of institutional real estate experience, providing access to off-market deals and institutional-level financing terms unavailable to smaller operators.

The signatory trustee structure empowers professional management to take necessary actions including restructuring financing, renegotiating leases or executing property sales to optimize returns and reduce risks.

This professional oversight provides fiduciary responsibility to investors while maintaining the passive nature of the investment.

Leading DST sponsors maintain dedicated asset management teams, sophisticated financial reporting systems and strategic relationships with institutional lenders and service providers.

This infrastructure creates operational advantages that translate into superior investment performance and risk management.

Risk management through institutional structure

DSTs provide superior risk management through several structural advantages. The institutional quality of underlying assets creates inherent stability, while professional management teams implement sophisticated risk mitigation strategies.

Commercial real estate sectors accessible through DSTs often demonstrate superior resilience during economic cycles compared to residential real estate.

DST investors enjoy limited liability protection through bankruptcy-remote provisions, ensuring that even in adverse scenarios, investor exposure is limited to their investment in the trust.

This protection extends beyond the property level to shield personal assets from potential creditor claims.

The scale and diversification possible within DST structures provide additional risk mitigation. Rather than being exposed to single-property risks, investors participate in professionally managed portfolios that can weather individual tenant departures, market fluctuations or property-specific challenges.

Long-term wealth-building potential

DSTs enable true generational wealth building through real estate by providing access to institutional-quality opportunities previously reserved for pension funds, endowments and large institutional investors.

The combination of superior assets, professional management, tax optimization and efficient structure creates compound advantages that accelerate wealth accumulation.

The ability to continuously execute 1031 exchanges between DSTs allows investors to upgrade their real estate holdings over time while preserving tax efficiency.

This creates a wealth-building cycle that can span decades, allowing investors to participate in increasingly valuable institutional assets while deferring taxes indefinitely.

For estate-planning purposes, DSTs provide excellent vehicles for transferring wealth to future generations while maintaining professional management and institutional-quality assets.

The passive nature and professional oversight make DSTs ideal for family wealth transfer strategies.

The clear choice for sophisticated investors

The choice between retail real estate platforms and DSTs represents a fundamental decision about investment sophistication and wealth-building ambition.

For those who qualify, DSTs offer access to the institutional real estate market with all its attendant advantages: Superior assets, professional management, tax optimization and true wealth-building potential.

Even so, it goes without saying that not all DSTs are created equal. Working with a financial advisory team with extensive experience in this area is essential for your short- and long-term investing success.

Related Content

• How to Use DSTs and 1031 Exchanges for Diversification
• A Little-Known Tax Buster for Rich Retirees: Zero-Coupon DST
• DST Exit Strategies: An Expert Guide to What Happens When the Trust Sells
• 1031 Exchanges: A Matter of Life and Death?
• Top 10 Myths About 1031 Exchanges, Debunked

This article was written by and presents the views of our contributing adviser, not the Kiplinger editorial staff. You can check adviser records with the SEC or with FINRA.

Off-season, most of them return to Manhattan, California or Palm Beach. But there has long been a thriving year-round community of everyone from artists and shop owners to fishermen (and the accompanying social tensions between the permanent residents and “the summer people”).

The COVID-19 pandemic prompted some well-heeled property owners to move full-time to the Hamptons to escape the density of New York. While that has made the area even more expensive and exclusive, it may still be a viable retirement spot for you.

Hamptons geography

The Hamptons, located in Suffolk County, comprise the South Fork of Long Island. “The East End” is a kind of shorthand for the Hamptons, which also contains the lands-end village of Montauk, which rests on the eastern tip of the South Fork and features scenic bluffs.

The Hamptons is made up of only two proper towns: East Hampton and Southampton. Each town is home to numerous villages and hamlets. East Hampton actually contains East Hampton Village, as well as Wainscott, Montauk and Amagansett, where Marilyn Monroe and Arthur Miller famously spent the summer of 1957.

For its part, Southampton encompasses double the number of villages and hamlets of East Hampton, including Southampton Village, Sagaponack, Quogue, Westhampton Beach, Water Mill and Bridgehampton. Only beloved Sag Harbor straddles both the ample towns of East Hampton and Southampton.

To capture the laid-back allure of Southampton, now would be an apt time to revisit the 2003 film Something’s Gotta Give, which gave the late Diane Keaton her final Academy Award nomination. The shingle-style home of Keaton’s successful playwright character is located at 576 Meadow Lane (though only the exterior was used in the movie). The beach scenes were shot in Water Mill. TV shows such as Royal Pains and The Affair were set in the Hamptons, and characters from Seinfeld to Sex and the City visited the exclusive refuge.

Money matters: real estate

Sure, in East Hampton, there’s currently an $85 million oceanfront home for sale (eight bedrooms, 12 baths), and a $28 million spread available on prestigious Georgica Road. But perfectly lovely homes (midway between 1,000 and 2,000 square feet), some with upgraded finishes, can be had for less than $2 million. So, East Hampton is feasible for retirees with a decent nest egg and who are on a fixed income. For example, a modest but carefully renovated two-bedroom saltbox is 1,500 square feet and is priced at $1.6 million.

Similarly, in highly coveted Montauk, you can find estates for more than $37 million (14 bedrooms), inventory in the $12 million to $17 million range, and homes on the market for under $5 million. Montauk has lots of shoreline — the Atlantic beaches off Old Montauk Highway, Fort Pond Bay on the town’s north shore, as well as the banks of Lake Montauk — but you’ll pay a premium for coastal access. A limited number of condos are available, from a tiny, 320-square-foot unit in a motel-like building, for $635,000 — but with a swimming pool overlooking the beach — to a beautifully renovated condo with three bedrooms and private outdoor space for over $1.5 million.

Southampton and Quogue are also at the pricier end of the scale, with Riverhead and Hampton Bays considered the most affordable.

A local view

Montauk resident Richie Winick, of the jewelry importer Manny Winick & Son, knows the Hamptons like the back of his hand and has never regretted choosing Montauk. His jewelry business was incorporated in 1954 and its main office is in Manhattan, but his kids go to school in Montauk — and Montauk is home. “This is a place for all ages,” he says, “but I am 65 years old, and this is where I will retire. I live six houses from the ocean, and I’m an avid surfer.”

Winick praises the village for its nature, its activities (sportfishing and horseback riding among them) and because “you don’t feel stuffed into a neighborhood.” He says the restaurants are “phenomenal,” citing The Harvest on Fort Pond, The Dock and Inlet Seafood. “Most everything is about a mile from each other,” he says. “It’s very convenient, very easy to navigate.” Winick says Montauk is undergoing “a real estate boom,” and is impressed by the number of hotels — such as the iconic Gurney’s Montauk Seawater Spa & Resort — that have undergone, or have plans to undergo, major facelifts, which only enhances residential property values.

“We’re 126 miles from New York, but you don’t feel like you’re living in suburbia,” he says. He analogizes East Hampton Village and Montauk to the difference between Manhattan and Brooklyn. “It’s a little bit edgier, a little bit cooler compared to the formality of East Hampton. Montauk is boho-chic.” (East Hampton’s famed Maidstone Club maintains its exclusive flavor — it did not accept Jews as members until the 1970s, turning down Groucho Marx and Diana Ross when they applied for membership.)

For prospective retirees and other homeowners considering the Hamptons, Winick likes Sag Harbor. “It’s a true fishing village,” he says. “I like the pop-and-pop shops, and I like that it’s not as pretentious as East Hampton. The biggest problem East Hampton has is that it sold out to major brands and it’s not accessible.”

Winick does, however, give kudos to East Hampton for opening the sorely needed Stony Brook East Hampton Emergency Department in 2025. It takes Winick 20 minutes to drive there from his home. For its part, Southampton is home to Stony Brook Southampton Hospital.

Takeaways

To orient yourself, immerse yourself in the East Hampton scene, taking in the fancy downtown and the beautiful homes on Georgica Pond. Then do a deep dive into Montauk, from the dock area on the north coast to the Atlantic in the south — it’s only a few miles to get from one to the other.

Don’t miss the charm of Sag Harbor, as well as popular Southampton Village, Sagaponack, Quogue, Westhampton Beach and Bridgehampton. Following Winick’s advice, if you want a casual atmosphere with stunning natural attributes, Montauk is for you. If you desire high society, check out East Hampton. Either way, be sure to book a table at East Hampton’s Nick & Tony’s, a local institution.

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More than half of U.S. mortgage holders have rates at 4% or lower, and about 80% are below 6%, according to Realtor.com. These historically low rates have created a "lock-in effect," where millions of homeowners are staying put because moving would mean giving up a once-in-a-lifetime mortgage interest rate.

Supporters argue that portability could loosen up inventory by making it more affordable for current homeowners to move. Critics say that it may introduce significant complications and offer little benefit to renters or first-time buyers struggling with today’s prices. Here’s what to know.

How portable mortgages work

A portable mortgage lets a homeowner carry their existing mortgage, including the interest rate and remaining balance, from their current home to their next one. It functions as the reverse of an assumable mortgage. Instead of a buyer taking over the seller’s loan, the seller takes their loan to the new property.

What happens depends on the next home you buy:

• Buying a cheaper home: Your sale proceeds reduce the mortgage balance, so the existing loan fits the new property’s value.
• Buying a more expensive home: You cover the difference with cash or a new loan at the current market rate.

Although portable mortgages do not exist in the U.S., they are common in Canada and the United Kingdom. In those markets, fixed-rate periods tend to be short, typically two to five years, which makes frequent renegotiation a built-in part of the system.

Why the idea is gaining attention

Portable mortgages could alleviate the payment shock for existing owners who want to downsize or relocate for work, family or health reasons. The idea could free up some inventory by providing rate-locked owners a way to move without taking on a significantly higher monthly payment.

However, with the median U.S. home price around $410,800 and the average 30-year mortgage interest rate at 6.24%, based on data from the Federal Reserve Bank of St. Louis and Freddie Mac, affording a home remains out of reach for many.

According to Chen Zhao, head of Redfin’s economic research, “America’s housing market is defined right now by caution. Buyers are walking away from deals more often, sometimes due to affordability issues and sometimes because they’re re-evaluating whether now is the right moment to commit. Others aren’t even shopping, waiting instead for prices or mortgage rates to come down. On the other side, many sellers are staying put — either because they’re locked into low rates or unwilling to accept offers below expectations. When both sides hesitate, sales naturally fall to historic lows.”

Zhao’s comment highlights why policymakers are looking for ways to thaw the market. Even if portability helps some current homeowners relocate, the larger environment remains challenging for both buyers and sellers.

Who benefits and who is left out

The homeowners who would gain the most are those holding mortgages from the low-rate years. Homeowners with 3% to 4% mortgage interest rates are the group most likely to use portability to make a move.

Renters and first-time buyers, however, would still face today’s high rates and high prices. Younger buyers in particular would continue to face large down payments and tight supply, which portability does not address. Critics also warn that giving some buyers more purchasing power could push prices higher for everyone.

Why the U.S. system makes portability difficult

The U.S. mortgage system relies on long-term fixed-rate loans that are bundled into mortgage-backed securities, which depend on predictable refinancing patterns. If homeowners could carry a 30-year loan from house to house, refinancing would become less common, and loan volume would likely fall.

Such a shift could disrupt how mortgage-backed securities are structured and priced. That change could reduce investor demand and ultimately lead to higher borrowing costs. Countries where portability works have shorter fixed-rate periods, which makes it easier for lenders and investors to adjust when a loan moves to a new property.

Would portable mortgages improve affordability?

Portability might make a move possible for some owners, and any increase in listings from sellers could provide some additional housing supply. Even if the system could accommodate portability, the core issue remains the same. Home prices are high, and supply is very limited.

The portable mortgage concept would not create new housing, lower current interest rates or reduce down payment barriers for potential buyers. It may help a small group of existing homeowners keep their payments manageable by allowing them to avoid today’s higher rates when they move. Still, it does not change the broader affordability picture for renters, first-time buyers or anyone trying to enter the market now.

What to expect going forward

The idea is still in the evaluation stage. Key questions remain regarding how lenders, regulators and investors would manage loan transfers, how pricing gaps between old and new mortgages would be financed and how the mortgage-backed securities system would adjust. How those details are resolved will determine whether portability can be introduced without disrupting the broader market.

For now, portable mortgages remain one concept under review. They may offer another option for certain homeowners with very low rates, but their overall impact will depend on how the final structure is designed and how borrowers choose to use them.

Curious about today's mortgage interest rates? Explore and compare some of today's top offers with the tool below, powered by Bankrate:

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Grocery prices are surging everywhere, but some cities have been hit harder than others. To figure out which places are feeling the pinch the most, I analyzed the latest grocery pricing data from the Council for Community and Economic Research to identify the 10 cities where residents are paying even more than the national average at the grocery store.

I also gathered data on median incomes for each city to estimate how much of a household's income was going toward putting food on the table. And the numbers may surprise you.

How high grocery costs stack up against expert recommendations

Financial experts typically recommend that you spend no more than 10% to 15% of your take home pay on groceries. That's your after-tax income.

Almost none of the cities below met that benchmark. Using pre-tax income data, eight out of 10 cities had average monthly grocery costs that exceeded 15% of household income — meaning the share of take-home pay going toward food is even higher.

The USDA’s monthly cost of food reports outline what a balanced, nutritious diet should cost nationwide. Based on the latest USDA food plan report, a 4-person household should spend between $926.90 and $1409.40 per month, depending on how thrifty they want to be.

But in eight of the 10 cities below, the average monthly grocery bill is higher than even the USDA’s “liberal plan,” the agency’s most generous estimate for a healthy monthly food budget.

See which cities made the list and how much residents are spending to keep their kitchens stocked.

Honolulu, HI

• 33.5% more expensive
• Average monthly grocery spend: $1,660
• Median household income: $102,382
• Grocery spend to income: 19.46%

Living full-time in paradise will cost you. Residents of Honolulu pay 33.5% more than the national average to eat.

On average, households earn $102,382 per year and spend $19,920 of that on groceries every year. That's 19.46% of income going toward food.

Juneau, AK

• 29.4%more expensive
• Average monthly grocery spend: $1,613
• Median household income: $99,748
• Grocery spend to income: 19.40%

Three Alaskan cities made the list for most expensive groceries, but Juneau's food bill was the highest of the three. Residents here pay 29.4% more than the national average. A typical household brings home $99,748 before tax and spends $19,356 of that on groceries.

That puts it just below Honolulu in terms of affordability, with grocery spend accounting for 19.40% of a household's income.

Fairbanks, AK

• 26.4% more expensive
• Average monthly grocery spend: $1,575
• Median household income: $86,780
• Grocery spend to income: 21.78%

Fairbanks might only have the second-most-expensive groceries in Alaska, but income here is spread thinner than it is anywhere else in the state. With a median household income of $86,780 and an average annual grocery bill of $18,900, the typical household spends 21.78% of its earnings on food.

That makes this the least affordable city for groceries in Alaska and the third least affordable city on this list – outranked only by Brooklyn, NY and Oakland, CA.

Anchorage, AK

• 25.7% more expensive
• Average monthly grocery spend: $1,567
• Median household income: $93,881
• Grocery spend to income: 20.02%

Alaska's capital isn't faring much better than Fairbanks. With prices here 25.7% higher than the national average, Anchorage residents spend $18,804 per year on groceries on average. That's 20.02% of the median household income of $93,881.

San Francisco, CA

• 19.1% more expensive
• Average monthly grocery spend: $1,485
• Median household income: $125,456
• Grocery spend to income: 14.20%

San Francisco wouldn't be most people's first thought when it comes to "affordable." Indeed, it is one of the most expensive cities to live in.

But when you compare the average grocery spend to the median income in the city by the bay, the typical household spends just 14.20% of its income to keep the fridge stocked.

Manhattan, NY

• 18% more expensive
• Average monthly grocery spend: $1,469
• Median household income: $101,078
• Grocery spend to income: 17.43%

Like San Francisco, it probably comes as no surprise that Manhattan would have higher food prices than the rest of the country. But also like San Francisco, a higher than average median household income helps offset that somewhat.

Though, Mahattanites aren't faring quite as well as their west coast counterparts. Here, a typical household earns $101,078 per year and spends $17,628 of that on groceries. That's 17.43% of income going toward food — not as bad as many of the other cities on this list, but noticeably higher than San Francisco.

Oakland, CA

• 14.7% more expensive
• Average monthly grocery spend: $1,429
• Median household income: $73,200
• Grocery spend to income: 23.43%

San Francisco might stand out for the "affordability" of groceries, but its neighbor to the east tells a different story. At 14.7% above the national average, prices are technically cheaper in Oakland than they are in San Francisco.

But, when you factor in the significantly lower median household income of $73,200, the cost to keep a household fed takes up 23.43% of that income. In terms of relative affordability, then, Oakland residents rank lowest among the cities on this list – meaning groceries are the least affordable here.

Brooklyn, NY

• 14.5% more expensive
• Average monthly grocery spend: $1,425
• Median household income: $76,912
• Grocery spend to income: 22.23%

Brooklyn is in a similar position as Oakland. The New York borough technically enjoys slightly lower prices on food compared to Manhattan, it's wealthier neighbor.

But, the dramatic income difference makes groceries far less affordable in Brooklyn than they are just across the East River.

San Jose, CA

• 13% more expensive
• Average monthly grocery spend: $1,408
• Median household income: $153,202
• Grocery spend to income: 11.03%

While San Jose, CA faces grocery prices that are 13% higher than the national average, most residents can shrug those above average prices off.

With a median household income of $153,202 and an average grocery spend of $16,896, San Joseans earn the most and spend the least on food compared to every other city on this list. Groceries take up just 11.03% of a typical household's pre-tax income.

Queens, NY

• 13% more expensive
• Average monthly grocery spend: $1,407
• Median household income: $81,399
• Grocery spend to income: 20.76%

In Queens, households pay 13% more than the national average for groceries, spending $16,884 per year to put food on the table. That's almost the same as San Jose. But, with a median household income of $81,399, residents here earn about half as much as the typical San Josean household.

That means groceries take up 20.76% of a household's budget in Queens. Their wallets might not be quite as strained as their Brooklyn neighbors, but they're definitely feeling the pinch more than the typical Manhattan household.

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But it's been more than a decade, and many of those who could best make use of those lessons weren't in kindergarten yet. That's why the resurgence of the "zero-down mortgage" is concerning.

Zero-down mortgages have existed in various forms for years, but typically, you must be part of a specific group to qualify.

For example, certain military veterans have been eligible for zero-down loans for some time.

Kiplinger's Adviser Intel, formerly known as Building Wealth, is a curated network of trusted financial professionals who share expert insights on wealth building and preservation. Contributors, including fiduciary financial planners, wealth managers, CEOs and attorneys, provide actionable advice about retirement planning, estate planning, tax strategies and more. Experts are invited to contribute and do not pay to be included, so you can trust their advice is honest and valuable.

This new mortgage differs in that borrowers don't need to belong to any given organization to qualify — simply showing they have enough income and a high enough credit rating is sufficient.

Under this mortgage plan, a home buyer would borrow 97% of the purchase price, up to $500,000, with a conventional mortgage. They would then borrow 3% on a second mortgage, which would count as a down payment of up to $15,000.

That second mortgage doesn't require any payments, nor does it accrue interest. However, it's due in full immediately upon either selling, refinancing or paying off the first mortgage.

About the global financial crisis

To understand why this is concerning, a brief refresher on the causes of the financial crisis is helpful. The year 2007 started as a typical banner time for the real estate market and banks that extended mortgages to buyers.

Houses had been increasing in value for decades, which led many banks to assume that ever-rising home prices were part of a dependable rule rather than a reversible trend.

Based on that assumption, banks began issuing subprime mortgages to borrowers with almost no concern for their ability to repay the loan.

The reasoning was that, should a mortgage holder default, the bank could simply repossess the house and sell it for more than the loan amount.

This gave rise to a particularly risky and colorfully named loan scheme, the NINJA mortgage. A No Income, No Job and No Asset loan was exactly what it sounds like — a mortgage extended to people who were unemployed and broke.

Subprime, and especially NINJA mortgages, sound risky because they are.

Had the assumption of perpetually increasing home values been correct, there would have been little to no consequences for the banks. Borrowers would have lost their homes, the banks would have sold them at a profit, and 2007 to 2008 would have played out very differently.

However, home values did decline, resulting in banks holding defaulted mortgages with no way to recoup their losses. Had it not been for a $700 billion bailout package from the U.S. government, the banking system would have largely collapsed, resulting in potentially irreparable harm to the economy.

The financial crisis caused changes in the way banks issue mortgages. No longer sufficiently confident to extend loans to anyone, they began once again to require actual, verifiable evidence that a prospective borrower would be able to repay the loan — a practice that continues today.

The concern is that if the new formulation of the zero-down mortgage becomes popular, it could indicate that another lesson from the financial crisis has been forgotten: There's no guarantee that home prices will always rise.

Homeowners assume risk

Unlike NINJA loans, the zero-down mortgage protects the banks because borrowers must have sufficient income, assets or both to indicate they're likely to be able to make their loan payments.

There is no such protection for the borrower, which means that $15,000 "down payment" loan could cause significant problems.

Consider a scenario in which interest rates drop from their current levels, which are roughly 6.5% to 7% for a 30-year fixed-rate mortgage.

Even if they only drop to 5% — a far cry from the 2% to 3% range we enjoyed a few years ago — the temptation to refinance will be hard to resist.

At an average cost of about $2,300 to refinance a loan, dropping your interest rate by more than two percentage points could save a significant amount.

If you have a zero-down mortgage, however, that $2,300 would be added to the $15,000 payment to discharge the down payment loan, making refinancing considerably more expensive.

Should a zero-down mortgage holder need to sell their home during a housing price slump, this mortgage could cause even more significant problems.

If the home's value has dropped such that the homeowner loses money on the sale and is unable to pay the $15,000 balloon payment, they could default on that loan, which, because it's a second mortgage, could further jeopardize the diminished proceeds of the sale or even trigger a foreclosure.

For many prospective borrowers, the risks likely outweigh the positives.

In today's environment of high home prices and high rent, it's understandable that it would be difficult for many to save the traditional 20% down payment.

However, down payment reduction is possible through various programs and offers.

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There are several 3% down programs: essentially the same as the zero-down program with the exception that the 3% would come from the borrower's savings rather than a second mortgage.

For many, that would be a prudent option. Even though 3% is not a lot, it's still enough to give borrowers a small amount of equity in the home they're buying.

The more equity you have, the more insulated you are from housing market fluctuations and the more likely you are to be able to use that equity to refinance your mortgage should rates drop.

Who should consider a zero-down mortgage?

It might seem as if I'm completely against putting 0% down on a home. In most cases, that's true, but under certain circumstances, the leverage afforded by low or no-interest loans can be used to make money.

If you have $15,000 saved for your down payment, it might make sense to take a zero-down mortgage and invest your savings instead. If you can get a higher return on that money rather than giving it directly to the bank, you can enhance your overall financial picture.

However, you must be disciplined if you choose to use debt in this way. Many take low-interest loans intending to invest the money, but instead, spend it on enhancing their lifestyle by taking vacations or buying nice possessions.

If a careful self-evaluation of your financial habits suggests you would do the same, it's likely more prudent to spend your down payment savings on a down payment.

Either way, it's important to be aware of all facets of your mortgage, especially the risk you might be assuming.

The implications of specific mortgage terms can be hard to understand. While tempting, zero-down mortgages have enough pitfalls that it's important to enter one fully aware of the risk factors.

To be sure you choose a mortgage that will be right for you, ask your financial adviser to review options with you.

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This article was written by and presents the views of our contributing adviser, not the Kiplinger editorial staff. You can check adviser records with the SEC or with FINRA.

FICO and VantageScore evaluate many of the same criteria to create scores, including an applicant’s record of on-time loan and credit card payments, but their formulas differ.

The version of VantageScore that mortgage lenders may now review, known as VantageScore 4.0, also factors in such alternative data as an applicant’s history of rent payments.

FICO’s newer models, including FICO 10T, integrate more of this nontraditional data, too. (Currently, however, many landlords don’t provide rental-payment info to the credit-reporting companies). Mortgage lenders that extend loans backed by Freddie and Fannie are using older FICO models now, but they will later be able to adopt FICO 10T.

Credit scores that include alternative data could present a more complete picture of an applicant’s credit history and expand the pool of those who get loan approvals, says Keith Gumbinger, vice president of mortgage information website HSH.com.

Curious about today's mortgage interest rates? Explore and compare some of today's top offers with the tool below, powered by Bankrate:

Regardless of which credit score a mortgage lender uses, you can boost your odds of being approved for a loan and capturing a desirable interest rate by following the basic rules to raise your score.

Make all your bill payments on time, and keep the balances on your credit cards low as a percentage of their limits. That’s especially important if you’re getting ready to apply for a mortgage; aim for a credit-utilization ratio in the single digits.

Get your free credit reports from annualcreditreport.com and correct any errors you find that could hurt your score.

Note: This item first appeared in Kiplinger Personal Finance Magazine, a monthly, trustworthy source of advice and guidance. Subscribe to help you make more money and keep more of the money you make here.

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That has sparked a new question: How can you fund a remodel without touching your first mortgage or maxing out credit cards?

Rather than relying on a traditional loan with fixed draws and paperwork-heavy funding, a growing number of lenders now offer flexible, card-based home equity lines of credit (HELOCs) that let homeowners tap their home’s value as needed. These hybrid products work much like a credit card, offering swipe access or digital transfers but with interest rates tied to home-equity lending rather than high-rate consumer credit.

Why homeowners are looking beyond traditional HELOCs

A standard home equity line of credit (HELOC) remains one of the most common ways to fund a home remodel. It offers a revolving line of credit secured by your home’s equity, typically with variable interest rates that are lower than most personal loans or credit cards.

But traditional HELOCs can feel rigid. Lenders often require a minimum draw amount, charge setup fees or impose strict repayment schedules. That’s where Trovy and similar platforms come in.

They combine the lower-rate borrowing power of a HELOC with the convenience and accessibility of a credit card. Instead of completing multiple forms and waiting for funds to transfer to a bank account, approved borrowers receive a Trovy card linked directly to their home-equity line.

With it, homeowners can pay contractors, purchase materials or move funds online, drawing only what they need, when they need it.

How a home-equity-backed card like Trovy works

Trovy’s model is designed for homeowners with built-up equity who want to finance projects gradually. You start by applying online, providing property details and verifying income and credit. Once approved, your line of credit is secured by your home but you don’t have to borrow a lump sum right away.

Instead, Trovy issues a HELOC card that functions like a credit card. You can use it for materials, appliances, contractor invoices and other purchases related to your renovation.

Because it’s tied to your home equity, the interest rate will likely be lower than a standard credit card. Trovy lists variable APRs in the 6% to 12% range, depending on your credit profile and available equity.

Other notable features:

• No minimum draw requirement. You only pay interest on what you use.
• No annual or closing fees. Trovy eliminates several costs that can make traditional HELOCs less appealing.
• Flexible repayment. Borrowers can pay down balances at any time without penalty.
• Tax-deductible interest. When funds are used for qualified home improvements, the interest may be deductible under IRS rules.

For homeowners managing multi-phase projects, say, a kitchen update now and a bathroom overhaul six months later, this flexibility can be a game-changer.

Real-world example: A remodel paid as it happens

Imagine a homeowner planning a $75,000 kitchen remodel. Rather than taking out a lump-sum home equity loan or depleting savings, they open a $100,000 Trovy line of credit. During construction, they use the Trovy card to pay a contractor’s $20,000 deposit and later buy $15,000 worth of appliances.

Because they’ve only drawn $35,000 so far, they pay interest on that amount, not on the full $100,000 line of credit. When phase two begins months later, they can use the same line to cover additional costs. This approach keeps cash flow flexible and helps avoid paying interest on unused funds.

It’s a modern take on the HELOC, built for how most renovations actually unfold one invoice, delivery or supply run at a time.

How Trovy compares to other funding options

The main advantage of a Trovy HELOC card is control. You can access your home’s value at lower rates than credit cards, but without the commitment of a lump-sum loan.

The trade-off is that, like any HELOC, your home is collateral. Missing payments could affect your credit or, in some cases, lead to foreclosure.

When Trovy makes sense and when it doesn’t

A home-equity-backed card is best suited for homeowners who:

• Have significant equity (at least 20%) and good credit.
• Prefer incremental funding over a single lump sum.
• Want a lower-interest alternative to credit cards for big-ticket home upgrades.
• Plan to deduct interest for qualifying renovations.

It may not be ideal if you:

• Don't have good credit.
• Don’t have enough equity.
• Prefer not to secure a credit line with your home.

The future of home-equity access

For homeowners who want to remodel without refinancing or racking up high-interest debt, Trovy’s home-equity-backed card offers a middle ground. You borrow only what you need, and enjoy rates below typical credit cards.

It’s not a one-size-fits-all solution, and borrowers should compare costs and read the fine print. But as more homeowners look for flexible ways to use their built-up equity amid high renovation costs, Trovy’s model offers a modern option in home-improvement financing.

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Military life comes with plenty of challenges: frequent duty-station relocations, irregular work schedules and overseas deployments, to name a few that we’ve been through. But servicemembers also have access to some significant financial benefits. In recognition of Veterans Day this November, I’m sharing below a few that are impactful for my family.

1. Housing allowance

One helpful perk is a tax-free subsidy, known as the basic allowance for housing, that covers all or part of your monthly rent or mortgage payment if you don’t live in government-provided housing on a military base. The amount you receive depends on the location of your duty station, your rank and whether you have dependents. You can use the BAH calculator to look up the value of your subsidy based on those factors.

2. Free college

The Post-9/11 GI Bill covers the full cost of in-state tuition and fees at public colleges for up to 36 months (four academic years). Or, if you go to a private or foreign college, you get up to a certain amount per year; for the current academic year, the rate is $29,921. The Post-9/11 GI Bill also provides money for housing, books and supplies, and tutors, among other expenses. Those who served on active duty for at least 36 months or meet certain other requirements are eligible for the full GI Bill benefit.

One of the best features is that if you’ve served for at least six years and commit to four more, you can transfer your benefits to your spouse or children. Tom has done that, splitting his benefits so that our two young sons will someday be able to use them for their educational expenses.

3. Retirement security

Military members can use the Thrift Savings Plan, a tax-advantaged retirement plan that’s similar to a 401(k). The TSP has low fees, with the expense ratio on its funds recently ranging from 0.036% to 0.051%. Under the military’s blended retirement system (BRS), which went into effect in 2018, servicemembers get an automatic TSP contribution from the government equaling 1% of their basic pay, plus a matching contribution of up to an additional 4% of pay after you’ve served for two years.

Pensions have become rare in the private sector. But military members who complete at least 20 years of active-duty service are eligible for a lifetime pension, and the payments start when they exit the military. If you retire at the 20-year mark, the government calculates the average of your highest 36 months of basic pay, and under the BRS, you receive a pension equal to 40% of that amount. For each year you serve beyond 20, you get an additional 2%. (Servicemembers who joined before 2018 and did not opt in to the BRS are eligible for a 50% pension when they reach 20 years of service, with 2.5% added on for each year past 20 — but they don’t get government contributions to the TSP.)

4. Low-cost life insurance

Servicemembers’ Group Life Insurance provides coverage at a low rate regardless of the servicemember’s age or health. To get the maximum $500,000 in coverage, servicemembers pay $26 a month in premiums. Spouses can also get coverage of up to $100,000 through Family SGLI; rates vary by age. A spouse between ages 35 and 39 can get $100,000 in coverage for $4.70 a month.

Note: This item first appeared in Kiplinger Personal Finance Magazine, a monthly, trustworthy source of advice and guidance. Subscribe to help you make more money and keep more of the money you make here.

Related content

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While financial advisers routinely recommend diversified portfolios of stocks and bonds, groundbreaking research and decades of tax policy innovations have created a compelling case for making real estate the cornerstone of any serious investment strategy.

Kiplinger's Adviser Intel, formerly known as Building Wealth, is a curated network of trusted financial professionals who share expert insights on wealth building and preservation. Contributors, including fiduciary financial planners, wealth managers, CEOs and attorneys, provide actionable advice about retirement planning, estate planning, tax strategies and more. Experts are invited to contribute and do not pay to be included, so you can trust their advice is honest and valuable.

The data speaks: Real estate's historical dominance

The most comprehensive analysis of investment returns ever conducted, titled The Rate of Return on Everything, 1870-2015, revolutionizes our understanding of asset class performance.

This Federal Reserve Bank of San Francisco study examined over 145 years of investment data across major asset classes, revealing findings that challenge conventional wisdom about portfolio allocation.

The research found that residential real estate delivered superior risk-adjusted returns compared to stocks, while demonstrating significantly lower volatility.

Over the entire study period, real estate achieved returns exceeding 8% annually after inflation, outpacing stocks while maintaining half the volatility of equity markets.

This "having your cake and eating it too" scenario represents the holy grail of investing: higher returns with lower risk.

Even when limiting the data to the modern era, post-World War II, real estate continued to demonstrate its superiority. Housing consistently outperformed bonds and Treasuries by substantial margins, while matching or exceeding stock market returns.

This consistency across different economic periods underscores real estate's fundamental strength as an investment vehicle.

The study's findings become even more compelling when considering real estate markets remain largely uncorrelated globally, unlike increasingly interconnected stock markets.

This insulation provides additional portfolio protection during market downturns, as property values in different geographic regions don't move in lockstep like international equity markets tend to do.

The power of leverage: Amplifying returns through strategic financing

While the San Francisco Fed's study examined unleveraged real estate returns, the true power of real estate investing emerges when incorporating strategic leverage.

Unlike stock market investing, where margin loans carry significant risks and limitations, real estate allows investors to safely amplify returns through mortgage financing.

Consider a property generating 8% annual returns, purchased with 75% financing at 6% interest. The investor's actual return on invested capital reaches about 14% annually, significantly outpacing what's achievable in traditional markets without assuming excessive risk.

This leverage advantage remains sustainable because real estate provides steady cash flow to service debt obligations while appreciating in value over time.

Moreover, real estate leverage is non-recourse in most cases, meaning lenders can claim the property itself only if problems arise, protecting investors' other assets.

This contrasts sharply with margin investing in stocks, where losses can exceed initial investments and trigger devastating margin calls, a phenomenon that can wipe out even the savviest of accredited investors (and the examples of this are many — such as when Long-Term Capital Management collapsed and Credit Suisse's Archegos Capital Management defaulted).

Tax advantages: The real estate investor's secret weapon

While pretax returns favor real estate, the post-tax comparison reveals an even more dramatic advantage.

Real estate enjoys numerous tax benefits unavailable to stock and bond investors, creating superior after-tax returns that compound over time.

Annual depreciation deductions shelter rental income from taxation, effectively providing tax-free cash flow during ownership.

This phantom expense reduces taxable income without requiring actual cash outlays, creating an immediate advantage over dividend-paying stocks that generate fully taxable income.

Capital gains treatment provides favorable tax rates upon sale, but real estate's true tax advantage lies in strategies unavailable to traditional investors.

These preferential treatments transform good pretax returns into exceptional after-tax wealth accumulation.

The 1031 exchange: Deferring taxes to infinity

The most powerful tool in real estate investing remains the Section 1031 like-kind exchange, which allows investors to defer capital gains taxes indefinitely by reinvesting sale proceeds into replacement properties.

This strategy, often called "defer till you die" or "swap till you drop," enables investors to compound their returns without tax drag, potentially over multiple decades.

Consider an investor who purchases a $200,000 property that appreciates to $400,000 over 10 years. Rather than selling and paying $40,000 in capital gains taxes (assuming a 20% rate), a 1031 exchange allows the entire $400,000 to purchase replacement property.

Over multiple exchange cycles, this tax deferral creates exponential wealth accumulation that's impossible through traditional investing.

The mathematics are compelling. An investor executing 1031 exchanges every seven years over a 30-year period can accumulate about 40% more wealth than someone paying taxes on each transaction.

This advantage compounds over time, creating generational wealth that far exceeds what's achievable through traditional buy-and-hold stock investing.

Multiple exchanges magnify this benefit. Sophisticated investors often execute three to five exchanges over their investing careers, each time upgrading to larger, more valuable properties while deferring substantial tax obligations.

The stepped-up basis provision means heirs inherit these properties at fair market value, permanently eliminating the deferred tax liability.

Qualified opportunity zones: Accelerating after-tax returns

The Tax Cuts and Jobs Act (TCJA) in 2017 created qualified opportunity zones (QOZs), offering additional advantages for real estate investors willing to invest in designated economically distressed areas.

These zones provide a pair of distinct tax benefits that further enhance real estate's appeal.

First, investors can defer capital gains taxes from any source by investing proceeds into QOZ properties, providing flexibility beyond traditional 1031 exchanges. (Current law defers these capital gains taxes until December 31, 2026, although proposed legislation may extend that deadline.)

In addition, and even more significantly, any appreciation within the QOZ investment itself becomes permanently tax-free if held for 10 years.

These benefits stack with traditional real estate advantages, creating unprecedented after-tax return potential. An investor might defer $100,000 in stock market gains by purchasing QOZ real estate, then eliminate taxes entirely on any property appreciation through the 10-year provision.

Risk-adjusted performance: The true measure of investment success

Superior returns mean little without considering risk, where real estate demonstrates additional advantages over traditional investments.

Real estate provides multiple income streams — rental income, appreciation, tax benefits and principal paydown through tenant payments — creating diversification within a single asset class.

Market volatility affects real estate less dramatically than stocks. While stock prices can fluctuate 20% to 30% annually, real estate values typically move more gradually, providing stability for long-term wealth building.

This stability proves particularly valuable for investors approaching retirement who cannot afford significant portfolio volatility.

Real estate also provides inflation protection unavailable in bonds or fixed-income investments. As costs rise, rental income and property values typically increase proportionally, maintaining purchasing power over time.

This inflation hedge becomes increasingly valuable when traditional "safe" investments fail to preserve wealth. (There's a longer conversation to be had about whether U.S. Treasuries still constitute a "safe" investment as the national debt spirals over $37 trillion … but that's for another article.)

Implementation strategy: Building a real estate-centric portfolio

Successful real estate investing requires systematic implementation rather than sporadic property purchases. Start with investment-grade rental properties in stable markets with strong rental demand and consistent appreciation patterns.

Focus on properties generating positive cash flow from day one while offering appreciation potential.

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For accredited investors seeking to begin or expand their real estate portfolios, Delaware statutory trusts (DSTs) provide an excellent entry point into institutional-grade properties.

DSTs allow investors to acquire fractional ownership in high-quality commercial real estate assets — such as Class A office buildings, retail centers or multifamily complexes — that would typically require millions of dollars to purchase individually.

These professionally managed investments provide access to premium properties with experienced operators handling day-to-day management responsibilities.

Importantly, DST interests qualify as replacement properties for 1031 exchanges, enabling investors to defer capital gains while transitioning from hands-on property management to passive real estate ownership.

Gradually scale the portfolio through strategic acquisitions, utilizing both cash flow and periodic refinancing to fund expansion. Execute 1031 exchanges when properties reach optimal sale timing, typically every seven to 10 years, to defer taxes and upgrade holdings.

Consider diversification across property types and geographic markets to minimize risk while maximizing return potential.

Single-family rentals, small multifamily properties and commercial real estate each offer unique advantages depending on market conditions and investor expertise, and all can be acquired individually, or as part of a DST investment.

Conclusion: The evidence-based case for real estate superiority

The combination of superior historical returns, favorable leverage opportunities, exceptional tax advantages and lower volatility creates an overwhelming case for real estate-centric investment strategies.

Academic research confirms real estate's historical outperformance while demonstrating lower risk characteristics compared to traditional investments.

Strategic use of 1031 exchanges amplifies these advantages by eliminating tax drag over multiple investment cycles, enabling wealth accumulation impossible through traditional approaches.

DSTs can improve returns even more, by enabling investors to upgrade the quality of their holdings even while throttling back on day-to-day property management.

QOZs provide additional acceleration for investors willing to target specific geographic areas.

While past performance provides no guarantee of future results, the fundamental drivers of real estate's superiority — limited supply, consistent demand, leverage availability and preferential tax treatment — remain intact.

These structural advantages suggest real estate's outperformance will continue benefiting knowledgeable investors who understand how to harness these powerful wealth-building tools.

The data is clear: Real estate investing, enhanced by strategic tax planning through 1031 exchanges, Delaware statutory trusts and opportunity zone investments, offers superior risk-adjusted returns compared to traditional investment alternatives.

Investors seeking optimal long-term wealth accumulation should seriously consider making real estate the foundation of their investment strategy.

Related Content

• New Opportunity Zone Rules Triple Tax Benefits for Rural Investments: Here's Your 2027 Strategy
• Five Strategies to Defer Capital Gains in Real Estate Investing
• I'm an Investing Expert: This Is How You Can Invest Like Warren Buffett
• Eight Signs You Might Be Ready to Start Investing in Real Estate
• This 1031 Exchange Strategy Can Triple Your Cash Flow

This article was written by and presents the views of our contributing adviser, not the Kiplinger editorial staff. You can check adviser records with the SEC or with FINRA.

While rates are expected to come down further, the clock is ticking on a package of energy-efficient home improvement tax credits that could put thousands back in your pocket after making eligible upgrades to your home.

You can always refinance a loan when rates drop further, but you won't be able to claim these tax credits after the new year, making this the "just right" time for home upgrades.

Here are the home upgrades that might be eligible and why it's worth squeezing these projects in before the year ends.

Tax credits worth up to $3,200 expire in December

The One Big Beautiful Bill ushers in several changes that taxpayers will need to consider as they plan for 2026. One of the most urgent changes you'll want to prepare for are the expiring tax credits.

Right now, you can claim 30% of the cost of any eligible residential clean energy upgrade made during the year.

You can also claim up to 30% of other energy efficient upgrades, with maximum credits ranging from about $150 up to $2,000, depending on the project. You can claim up to a total of $3,200 for all energy efficient home improvement projects completed through the end of the year.

Which projects are eligible for tax credits? You can find the full details on the IRS website.

Here are some of the key projects you might want to get done before December 31, 2025, to claim the energy efficient home improvement tax credit:

• New exterior doors or windows
• New insulation or air sealing materials
• Upgraded HVAC equipment
• Upgraded water heaters, biomass stoves or boilers

If you've been thinking about installing solar panels or other renewable energy equipment in your home, the residential clean energy credit also expires on December 31. You'll need to move fast if you were banking on that 30% tax credit.

Make sure that the upgrades you're making meet the energy efficiency standards set out by the Environmental Protection Agency (EPA). You'll also only be able to claim these credits on your primary residence. Your vacation home or rental properties are ineligible.

You should also check with your state as well as your local utilities for any additional rebates or discounts you might be able to stack on top of your federal tax credits.

Falling Fed rates are good news for borrowers

At its October meeting, the Federal Reserve dropped its target rate to the 3.75% to 4% range. That's the second cut of the year, which should bring borrowing costs down with it.

For homeowners planning to use a HELOC, that's even more reason to knock out those renovation projects you've been putting off.

Rates on home equity loans also tend to drop in response to Fed rate cuts — as do other types of debt. If you haven't taken out a home equity loan or HELOC yet, use our home equity tool below, powered by Bankrate, to compare rates you can get today:

You'll benefit from hiring contractors during the off season, too

Winter is a slow season for many contractors, especially with the holidays approaching. Some might be willing to offer discounted rates for projects during this time.

Even if you can't leverage your timing into a deal, it could at least ensure your project is done quickly and smoothly. Since contractors are unlikely to be juggling as many projects as they do during peak season, your home could be high on their priority list.

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Whether it’s a murder, a suicide, a notorious crime or even a rumor of paranormal activity, homes with unsettling histories are known in real estate as “stigmatized properties.”

For sellers, that stigma can raise difficult and occasionally eerie questions. Do you have to tell buyers your house is haunted? And could it hurt your home’s value? Here’s what to know about disclosing (and marketing) a home with a haunted reputation.

What is a “stigmatized” home?

A stigmatized property isn’t physically defective; it’s psychologically or socially marked in a way that might make buyers uneasy. That could include:

• A death on the property
• A crime, such as a murder or drug activity
• A history of paranormal reports or local lore
• Past ownership by someone notorious or controversial

Even when a home is in excellent condition, perception can be as powerful as reality. A death on the property might be enough to turn them away, and that’s not always something sellers can easily prove or explain.

Others might simply fear the unwanted attention that comes with a home known for ghost tales or true-crime rumors.

Stigma can influence a sale, from fewer showings to lower offers. Still, not all stigmatized properties lose value. As a young real estate agent, I was often surprised by how many of these listings drew extra interest from buyers eager to own a piece of history.

I once helped a client purchase a commercial property in Detroit, rumored to have ties to the mafia in the 1920s. The basement still showed traces of its past with remnants of a speakeasy that hinted at the city’s bootlegging era. Rather than scaring buyers away, the building's story added intrigue. The couple who bought it were thrilled to own a slice of Detroit's history.

In that case, the seller didn’t have to disclose it, but depending on where you live, the rules around what sellers must reveal can be surprisingly different.

The surprising patchwork of state disclosure laws

When it comes to disclosing a home’s haunted history, the rules are far from uniform, and in some states, silence is perfectly legal.

Only a handful of states have specific statutes addressing stigmatized properties.

• California: Sellers must disclose any death that occurred on the property within the past three years.
• Alaska: Agents must disclose a murder or suicide that happened on the property within the past year.
• South Dakota: Sellers must disclose any homicide or suicide that occurred while they owned the property.
• Massachusetts, Minnesota and New Jersey: Sellers don’t have to disclose alleged paranormal activity, but if a buyer asks directly, they can’t lie.

In most other states, the rules are broader. Sellers generally must disclose material facts that could influence a buyer’s decision, and whether a haunting qualifies often comes down to interpretation.

It’s also worth noting that many real estate agents are bound by ethical disclosure rules that go beyond state law. If something about the property’s reputation could influence the sale, most real estate agents will err on the side of transparency. Real estate works best when you lead with honesty, even if it means revealing a skeleton or two in the closet.

How to price a home with a spooky reputation

Does a haunting hurt your home’s value? The data is mixed. A Zillow survey found nearly 70% of buyers would consider a haunted house if it met their other must-haves: price, location and amenities. Most said they’d expect a discount only if the haunting were well known or the property had been the site of a serious crime.

If your home has a complicated past, stick to facts, not folklore. Work with an agent who knows your state’s disclosure laws and can help position the property to get top dollar.

A spooky story doesn’t always scare off buyers. Some of the most notorious homes in America have sold for millions, proving that the right blend of history and intrigue can still attract serious offers.

Haunted homes that still sold for a scary good price

Even the most infamous properties can find buyers. These haunted or historically notorious homes prove that reputation doesn’t always stop a sale, though it can influence the price.

The Conjuring House

Location: Burrillville, Rhode Island

Last sold for: $1.53 million (2022)

Built in 1736, this farmhouse inspired The Conjuring after reports of paranormal activity from the Perron family in the 1970s. It now operates as a destination for ghost tours and investigations.

LaLaurie Mansion

Location: New Orleans, Louisiana

Last sold for: $4.3 million

Once owned by socialite Madame Delphine LaLaurie, the mansion is infamous for the abuse of enslaved people in the 1830s. Actor Nicolas Cage later owned it before losing it to foreclosure.

Winchester Mystery House

Location: San Jose, California

Last sold for: $135,000 (1922)

Heiress Sarah Winchester spent decades expanding this labyrinth of a mansion, believed to be haunted by the spirits of those killed by Winchester rifles. It’s now valued in the millions.

Amityville Horror House

Location: Long Island, New York

Last sold for: $605,000

Made infamous by the 1974 DeFeo family murders and the Amityville Horror book and films that followed, this colonial-style home sold for well below market value due to its tragic history. Despite renovations and address changes, its reputation remains one of the most notorious in American real estate.

What to say (and not say) when listing your home

If your home has a history buyers may have heard about, be mindful of your wording to prevent any Halloween-style surprises at closing.

Be honest, but not sensational. You don’t need to include “Murder House on Maple Street” in your property description, but you shouldn’t conceal facts that might be easily discovered with a Google search.

Answer questions directly. If a buyer asks, “Has anyone died here?” and the answer is yes, say so plainly. Honesty builds trust and reduces the risk of disputes later.

Avoid feeding rumors. If neighborhood gossip claims your house is haunted, you don’t have to validate it, but it’s smart to acknowledge what’s public record or widely known. “The home has been part of local folklore” is a neutral way to address it. When possible, provide documentation, news coverage or public records to clarify the facts.

Focus on positives. Emphasize the home’s strengths, updated systems, modern design, great location while being prepared to discuss its history privately if asked.

A not-so-scary ending for sellers

Haunted or not, every home has a story. If yours happens to include one that’s a little darker, you don’t need an exorcist, just a disclosure strategy.

Understand your state’s laws, be transparent when asked and work with a knowledgeable agent who can guide you through sensitive buyer conversations. After all, one person’s nightmare listing might just be another’s dream home.

Luckily, your home insurance policy doesn’t require you to disclose any ghosts. Use the tool below to explore and compare some of today’s top home insurance offers, powered by Bankrate:

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That's when the IRS and Treasury Department issued Notice 2025-50, providing the first concrete guidance on the permanent opportunity zone program signed into law in July as part of the One Big Beautiful Bill Act.

The headlines tell only part of the story. Yes, the opportunity zone program is now permanent. Yes, there's a new emphasis on rural investment.

However, what most investors are missing is this: The guidance identifies exactly which 3,309 census tracts qualify for dramatically enhanced tax benefits starting immediately — and it provides the road map for understanding which zones will likely qualify when the entire map is redrawn in 2027.

Kiplinger's Adviser Intel, formerly known as Building Wealth, is a curated network of trusted financial professionals who share expert insights on wealth building and preservation. Contributors, including fiduciary financial planners, wealth managers, CEOs and attorneys, provide actionable advice about retirement planning, estate planning, tax strategies and more. Experts are invited to contribute and do not pay to be included, so you can trust their advice is honest and valuable.

For investors with substantial capital gains who seek to defer taxes and potentially eliminate them entirely on future appreciation, the next 15 months represent a strategic inflection point unlike anything we've seen since the program was launched in 2018.

What changed on September 30

The IRS guidance addresses two critical questions that kept opportunity zone fund managers and investors in suspense since the law passed in July: What exactly constitutes a "rural area" for purposes of the enhanced benefits? And which of the current 8,764 opportunity zones qualify?

The answers are now much clearer. A rural area is defined as any census tract that isn't in a city or town with a population greater than 50,000 and isn't in an urbanized area adjacent to such a city or town.

Using this definition and 2020 Census data, Treasury identified roughly 38% of all current Opportunity Zones — 3,309 specific census tracts — qualify as entirely rural.

Why does this matter? Because investments in these rural zones come with turbocharged incentives that took effect the day the law was signed: July 4, 2025.

The rural advantage: Triple the benefit, half the requirement

For standard opportunity zone investments, investors receive a 10% basis step-up after holding their investment for five years. This reduces the amount of deferred capital gains ultimately subject to tax.

For qualified rural opportunity funds investing in these 3,309 designated rural tracts, the basis step-up jumps to 30% — triple the standard benefit.

If you're deferring a $2 million capital gain, that's the difference between excluding $200,000 from taxation vs $600,000. At current capital gains tax rates, we're talking about an additional $95,200 in tax savings.

But the real game-changer is the substantial improvement requirement. Traditional opportunity zone rules require investors rehabilitating existing buildings to invest at least 100% of the property's adjusted basis in improvements.

That means if you acquire a building valued at $5 million, you need to invest another $5 million in renovations … a $10 million total project just to meet the threshold.

Under the new rural rules, that requirement drops to 50%. The same building now requires only $2.5 million in improvements for a $7.5 million total project.

This dramatically expands the universe of economically viable projects, particularly for adaptive reuse, historic preservation and workforce housing development.

These aren't theoretical benefits coming in 2027. Any investment in qualifying rural opportunity zones since July 4, 2025, is already eligible.

The 2027 redesignation: A preview of coming attractions

While the rural benefits are immediate and actionable, the bigger strategic question facing investors is what happens when the entire opportunity zone map gets redrawn. Beginning July 1, 2026, state governors will begin nominating new census tracts for designation, with the new map taking effect January 1, 2027.

Here's where things get interesting — and where a new OZ mapping tool becomes invaluable.

Novogradac, the accounting and consulting firm that tracked over $42 billion in opportunity zone investments and serves as the industry's de facto data authority, released its Opportunity Zones 2.0 Mapping Tool in August.

This tool shows which census tracts are "likely eligible," "likely eligible and rural" or "likely not eligible" for the 2027 designations based on current data.

The tool is expected to be 90% to 95% accurate once the Treasury certifies the final eligible tracts in 2026, making it the best crystal ball available for strategic positioning.

What the data reveals is sobering for urban investors, but exciting for those focused on rural America: The new rules tighten the eligibility criteria from census tracts with median family income of 80% of the area median down to 70%.

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This single change is projected to disqualify roughly 22% of currently designated zones — about 1,900 census tracts won't make the cut in 2027.

Industry experts project about 6,530 total opportunity zones in the new map, down from today's 8,764.

The winners? Rural areas — they must comprise at least 25% of each state's nominations under the new requirements.

The strategic timing dilemma

This creates what I call the "2026 paradox" for investors with significant capital gains. Do you invest under the current program before December 31, 2026, or wait for the enhanced benefits that take effect January 1, 2027?

There are compelling arguments for both approaches … or better yet, a "both/and" strategy that splits gains across both programs.

The case for investing now:

• You start the 10-year clock immediately for tax-free appreciation
• You have certainty about which census tracts qualify (the current map is known; the 2027 map won't be finalized until late 2026)
• Many of the best-performing zones from the first round won't qualify under the stricter 2027 rules

The case for waiting until 2027:

• Enhanced rural benefits (30% vs 10% basis step-up)
• Rolling five-year deferral period instead of a fixed 2026 recognition date
• Fresh zones that may offer better risk-adjusted returns

For investors with substantial multiyear capital gains events — such as installment sales of businesses or real estate — there's an elegant solution: Structure transactions to generate gains in both 2026 and 2027, then deploy capital into the most appropriate program for each tranche.

What December brings

The next critical date is December 2025, when the Census Bureau will release the 2020-2024 American Community Survey data. This updated information on income, poverty rates and census tract boundaries will allow Treasury to finalize which tracts are eligible for governor nomination.

Once that data drops, investors and developers will have about six months to conduct due diligence on likely qualifying zones before governors begin their formal nominations on July 1, 2026.

For those looking to acquire property in zones likely to be redesignated, this represents a valuable window to secure positions at potentially lower predestination prices.

The bottom line

The permanent extension of opportunity zones, combined with the dramatic enhancements for rural investment, represents a generational shift in place-based investment incentives.

The September 30 IRS guidance didn't just clarify the rules; it provided sophisticated investors with a road map and timeline for strategic positioning.

For high-net-worth families with significant unrealized gains in stock portfolios, business interests or real estate holdings, the next 15 months demand careful planning.

The decision isn't whether to consider opportunity zone investing. With stock markets near all-time highs and a permanent, enhanced program now in place, the question is when and where.

The IRS guidance provides immediate clarity on rural zone benefits. And December's Census data release will sharpen the picture considerably.

As always, opportunity zone investing requires careful coordination with experienced tax and legal advisers to ensure compliance with the complex timing and investment requirements. But for investors willing to do the work, the combination of multiyear tax deferral and potentially tax-free appreciation remains one of the most powerful wealth-building tools in the tax code.

The opportunity is here. The map is (mostly) drawn. And the clock is ticking.

Related Content

• Opportunity Zones: An Expert Guide to the Changes in the One Big Beautiful Bill
• Striking Oil in Opportunity Zones: Now Might Be the Best Time to Invest
• 1031 Exchanges vs Opportunity Zones: Which Has the Edge?
• Five Strategies to Defer Capital Gains in Real Estate Investing
• How to Invest in Qualified Opportunity Zones: Step-By-Step

This article was written by and presents the views of our contributing adviser, not the Kiplinger editorial staff. You can check adviser records with the SEC or with FINRA.

A second home can be more than just a weekend retreat. It can double as an investment property that earns income and appreciates over time. But if you’re not careful, that dream getaway could quickly turn into a financial headache.

Before you start house hunting, it’s important to weigh the benefits and drawbacks. Here’s what to consider before buying a vacation home.

Pros and cons of owning a vacation home

A vacation home comes with a ton of upside, but if you’re careless in your research and spending, you could end up wasting your money. Still, several financial and lifestyle benefits can make a second home a smart move if the numbers work in your favor.

Pros of owning a vacation home

• Personal getaway. You get a place you can always stay, without paying for lodging. You don’t need to get a hotel or book an Airbnb.
• Potential rental income. While you’re not using it, you can make your home work for you. Smart interior design can transform your vacation home into an income-generating rental.
• Long-term appreciation. A well-chosen vacation home can do more than give you a place to relax, it can grow in value over time. When the market’s strong, selling later could mean pocketing more than you paid.
• Potential tax breaks. You might get some savings come tax time with a vacation home. For instance, you can deduct the mortgage insurance you pay on your second home. You may also qualify for state and local tax deductions.

Cons of owning a vacation home

• High upfront costs. Buying a vacation home means you’ll need to come up with a down payment and closing costs. In the second quarter of 2025, the median home sale price was $410,800. Even if you only come up with 10% down, that’s more than $41,000.
• Expensive ongoing costs. You’re on the hook for insurance, property taxes, utilities and HOA fees, if applicable. If you put less than 20% down, you'll pay private mortgage insurance (PMI). This is all on top of the expenses for your primary residence.
• Home maintenance. From routine repairs to unexpected fixes, like a burst pipe or broken appliance, those costs can add up quickly — especially if you’re managing the property from afar.
• Potential depreciating value. Home values in vacation destinations can swing with demand and the economy. A market slowdown could lower your property’s value and cut into your potential return if you decide to sell.

How to decide if a vacation home makes sense for you

Signs you’re ready to own a vacation home

A vacation home isn’t for everyone, but it could make sense if you can manage both the upfront and ongoing costs of ownership. It helps to plan on keeping the property for several years so you can build equity and weather market changes. If you also have a strategy to generate income, such as renting it out when you’re not using it, your second home can serve as both a retreat and a long-term investment.

When a vacation home might not be the right move

A vacation home may not be the best choice if the down payment and closing costs stretch your budget too far. It can also become a financial burden if you’re not prepared for ongoing expenses like maintenance, insurance, and property management.

Real estate experts often recommend holding a property for at least five years to recover transaction costs and ride out market shifts. If you’re unsure how long you’ll keep the home, the short-term costs of buying and selling could outweigh any potential rewards.

Curious about today's mortgage rates? Explore and compare some of today's best offers with the tool below, powered by Bankrate:

How to prepare before buying a vacation home

Before you head to an open house or make an offer, take time to run the numbers and see how much home you can truly afford. Think through what you want from a vacation home — whether it’s a personal getaway, a rental investment, or both — and set a budget that keeps you financially comfortable.

Remember that owning a second property comes with new responsibilities. Your budget should cover not just the purchase price and closing costs, but also ongoing expenses like maintenance, insurance, utilities, and property management.

If you plan wisely, your vacation home can do more than offer a change of scenery. Turning it into a rental property when you’re not using it can help offset costs and improve your long-term return on investment.

A second home can be worth it but only with clear eyes

Buying a vacation home is a big decision that requires more than daydreaming about weekends away. It calls for an honest look at your finances, lifestyle and long-term goals. Take time to consider whether a second home will add comfort and enjoyment to your life or create more responsibility than you want to take on. The best choice is one that aligns with your budget, priorities and peace of mind.

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However, rising material costs driven by tariffs and increased labor expenses mean home renovation projects are becoming more expensive. Careful planning is key to keeping your project on track and avoiding unpleasant financial surprises along the way.

We’ll walk through how to estimate renovation costs, plan for unexpected expenses, and explore smart financing options to help you pay for your project.

How to plan and budget for your home renovation

Start by making a detailed list of your planned renovations, including the materials you’ll need, estimated labor costs, required permits, and any other expenses. Then, get at least three written quotes from different contractors.

These quotes will give you a general idea of what your renovation might cost, but it’s wise to expect the unexpected. Set aside an extra 10% to 20% of your total budget to cover unforeseen expenses that may arise during the project.

Saving enough cash to cover a major renovation — especially a large project like a full kitchen remodel — can be challenging. In addition to the money you’ve already set aside, several financing options can help you bridge the gap and start your renovation sooner without putting your plans on hold.

Tap home equity with a HELOC or cash-out refinance

You can use your home’s equity to finance a renovation with a HELOC or cash-out refinance, but you’ll need to understand the pros and cons of each.

A home equity line of credit (HELOC) allows you to borrow against a portion of your home’s equity, giving you access to funds as needed rather than a lump sum upfront. You’ll pay interest only on the amount you actually withdraw, making it a flexible option for projects with costs that may change as the renovation progresses.

Keep in mind that HELOCs usually have a variable interest rate during the draw period, which means the amount of interest you’re paying on the money you’ve borrowed can fluctuate.

Your home will also be used as collateral, so if you’re unable to repay the money you’ve borrowed, you could ultimately face foreclosure.

Most lenders limit how much equity you can take out in a cash-out refinance. In most cases, you can borrow up to 80% of your home’s appraised value, meaning you’ll need to keep at least 20% equity in the home after refinancing. This rule helps protect both you and the lender from taking on too much risk and ensures you maintain a healthy stake in your property.

A cash-out refinance allows you to take out a new, larger mortgage to replace your current one, giving you the difference in cash to use for your renovation. For example, if you owe $100,000 on your home and refinance for $175,000, you’d get $75,000 to use toward your renovation — and then begin making payments on the new $175,000 mortgage.

A cash-out refinance replaces your existing mortgage with a new, larger one, so it’s important to ensure you can comfortably manage the higher monthly payments. If today’s interest rates are higher than when you first took out your mortgage, your new loan could cost you more over time.

On the other hand, if rates have dropped, refinancing might actually lower your overall interest costs. Choosing a fixed interest rate can also give you peace of mind, since your payments will remain consistent throughout the life of the loan.

Don’t forget that you’ll also need to pay closing costs when you refinance. Refinancing costs average 3% to 6% of the loan principal.

Consider a personal loan if you lack home equity

If you haven’t built up much home equity yet, a personal loan is another financing option that can help cover the cost of a renovation. With a personal home improvement loan, you can quickly access a lump sum of cash, and you’ll pay interest on that balance as you make fixed monthly payments.

Personal loans typically come with fixed interest rates, so your monthly payments stay the same for the life of the loan. According to ProFed Credit Union, rates generally range from 5% to 36%, depending on factors like your credit score and lender. Borrowers with strong credit are more likely to qualify for lower rates, which can make a personal loan a more affordable option than using a credit card.

With an unsecured personal loan, you don’t have to provide collateral, unlike a HELOC, which uses your home as security. This makes personal loans a convenient option for smaller renovation projects.

However, loan terms and monthly payments can vary depending on the lender, so review all details carefully before committing to ensure the payments fit comfortably within your budget.

Use a credit card strategically for materials and tracking

Credit cards can be a valuable financing tool when covering the cost of materials, plus they make tracking expenses easier. For example, by applying for a 0% APR credit card that allows you to pay no interest for an introductory period, you can finance material purchases.

As long as you pay off your balance in full during that introductory period, you won’t pay interest on those purchases. Some credit cards offer cash back rewards, so you could earn some money back on purchases like fixtures or supplies.

You might choose to use different credit cards to separate project expenses and simplify tracking. Your credit card statements can help with monitoring your budget.

If you’re considering a HELOC, look for a lender that offers a credit card linked to your line of credit. These cards make it easy to access your HELOC funds as needed, allowing you to make purchases with a tap or swipe. Your payments are then based on the amount you’ve borrowed from your home’s equity.

One example is the Trovy card, a home-equity-backed line of credit that functions like a traditional credit card. You can use it at ATMs, in stores, or online to pay for materials, appliances and other renovation essentials.

Instead of taking out a lump-sum loan, the Trovy card lets you access your available funds gradually as your project progresses.

Keep your project on track financially

To keep your renovation on budget, track your spending closely using a budgeting app or spreadsheet. Update your costs regularly and enter expenses as soon as you make purchases. This will help you spot overspending early and make adjustments before your project goes too far off track.

Be sure to save all of your receipts as well. They may be useful for claiming tax deductions or documenting your home’s increased value when you sell. Consider digitizing your receipts with an app to stay organized and avoid losing important records.

Choosing the right financing to make your renovation a reality

Renovating your home can be a rewarding investment, improving both your comfort and your property’s value. But with rising costs, careful budgeting and smart financing are essential.

Whether you tap into your home equity, take out a personal loan, or use credit strategically, choose the option that best fits your financial situation and long-term goals. With the right plan in place, you can bring your renovation vision to life without putting unnecessary strain on your budget.

Explore and compare some of today's best refinance offers with the tool below, powered by Bankrate:

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We've come to the fourth and final installment of our deep dive into the top 20 most common financial myths.

Throughout this series, we've examined a wide variety of topics, from stock and bond performance to retirement readiness, life insurance, Social Security, income taxes and more.

Kiplinger's Adviser Intel, formerly known as Building Wealth, is a curated network of trusted financial professionals who share expert insights on wealth building and preservation. Contributors, including fiduciary financial planners, wealth managers, CEOs and attorneys, provide actionable advice about retirement planning, estate planning, tax strategies and more. Experts are invited to contribute and do not pay to be included, so you can trust their advice is honest and valuable.

Here are myths 16-20, along with the facts:

16. Social Security and Medicare are 'entitlements' funded by the government (i.e. taxpayers)

Most people think of an entitlement as something they get for free, regardless of whether they work for a living.

But American workers pay into Social Security and Medicare their entire working lives (if you're self-employed, you're paying twice as much), so these programs aren't freebies.

However, it's important to remember that Social Security isn't an income replacement. Those on the lower end of the spectrum might receive about 65% to 80% of their earned income.

Higher-income earners will get a lot less, as a percentage, since Social Security benefits plateau at $61,000 per year for 2025.

Ultimately, Social Security and Medicare are crucial benefits but should ideally work alongside your other investments (company-sponsored 401(k), individual retirement account and self-directed accounts) to provide you with income in retirement.

17. Since life insurance payouts are income tax-free to my heirs, I won't owe estate taxes on these payouts

When someone with life insurance dies, their beneficiaries receive the policy's face value as a tax-free benefit.

But when their spouse or child prepares the decedent's final tax return, the estate might owe state or federal estate taxes, depending on how large the estate is.

While life insurance comes to you income tax-free, remember there are different types of taxes, and the decedent's estate could still be taxed.

If you're wealthy, you should consider taking extra steps to protect your estate. You can do this by transferring your life insurance policy into an irrevocable life insurance trust (ILIT), in which your beneficiaries, not the decedent, own the trust, so life insurance proceeds are not part of the decedent's taxable estate.

Another similar option for married couples is to open a spousal lifetime asset trust (SLAT), which allows the decedent's spouse to live off the income produced by the trust while the asset itself remains in the SLAT and is exempt from estate tax liabilities.

18. Reverse mortgages are 'bad' and make no financial sense for homeowners

As a financial planner, I reject the notion that any one financial strategy is inherently "good" or "bad." I consider each client's specific situation and recommend a plan that is right for them.

While reverse mortgages have gotten a bad rap for years, they can be an effective tool for a specific type of client: people who are income-poor but asset-rich.

Rules and regulations around reverse mortgages and, specifically, HECMs (home equity conversion mortgages) have been updated to protect against most of the problems incurred by consumers decades ago.

Several years ago, I worked with a retired woman who lived in a fully paid off house in a wealthy neighborhood, but had no income outside of Social Security.

She needed additional income, wanted to stay in her home, was estranged from her children and planned to leave her estate to charity. This could be a perfect scenario for taking out a reverse mortgage.

When you obtain a reverse mortgage, you're converting home equity into an income stream. The bank or mortgage provider determines the maximum size of your loan based on age, interest rate and equity.

Unfortunately, in a high-interest rate environment, you can burn through your equity quickly, so borrowers should think carefully about the potential impact it can have on beneficiaries.

Typically, clients have other assets to sell or borrow against for income, so reverse mortgages aren't something I normally recommend, though they can be very effective when used strategically.

19. Since I raised our children and never paid into Social Security, I won't be eligible for Social Security benefits

If you're a nonworking spouse, you can access up to 50% of your working spouse's Social Security benefit while they are alive, meaning that, for example, a woman whose husband qualifies for $4,000 in benefits will qualify for up to $2,000 of her own benefits.

In a case in which the husband dies first, she would then qualify for the survivor benefit at the higher amount, $4,000.

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Additionally, a divorced spouse can qualify for a portion of their former spouse's benefit if they were married for 10-plus years and haven't subsequently remarried.

Your spousal benefit won't impact your ex-spouse's own benefit; they won't even know you're receiving it.

20. Responsible financial planning dictates that individuals should carry life insurance throughout their lifetimes

People often think they need to carry life insurance throughout their lives, but that's wrong. As a financial planner, I look at life insurance primarily as a replacement for income when someone is in their working years and has others who depend on their salary (e.g., spouse, children).

If a couple has had a successful working life, made money and invested it smartly, there might be no need for life insurance, because there is no income to protect after they retire.

There are other reasons to carry life insurance. Wealthy people who own businesses or real estate often take out life insurance for liquidity at their passing.

For example, I used to work with a farmer in the Midwest who owned 1,000 acres of farmland valued at about $10 million; he had no other assets.

By taking out life insurance, he can provide his family with cash to pay any taxes owed on his estate, avoiding a potential fire sale and allowing his heirs to (potentially) continue farming the family's land.

Beyond estate taxes, some people take out policies for philanthropic pursuits, to leave a legacy or establish a scholarship or foundation, but it's unnecessary to do so from a pure income-replacement standpoint.

Knowledge is power. Now that we've gone through the full list of 20 financial myths, you can set the record straight when a friend or relative makes a simplistic or incorrect statement such as "Social Security is going bankrupt," or "investing in the S&P 500 means you're broadly diversified."

Financial planning is complex and not conducive to black-and-white answers. That's why it's important to speak with a knowledgeable professional who can guide you through the process and devise strategies that are right for you, your family and your unique circumstances.

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• IRA vs Roth vs 401(k): Which Do You Pick?

This article was written by and presents the views of our contributing adviser, not the Kiplinger editorial staff. You can check adviser records with the SEC or with FINRA.

It was the summer of 2021. We were growing tired of renting, so we decided to try buying a home. However, there was a problem: Where we lived in Florida, we couldn't get a shack for under $500k.

Instead, we moved to the Midwest, where our money went quite a bit further. We bought a home built in 1985 that was a capsule in time. Thanks to my in-laws, we were able to revitalize the place, making it look contemporary and upgrading its functionality.

Now, with our baby girl soon to be crawling around our small home, we realized we need more space. As such, we're starting to see some of the oopsies we — and many homebuyers — might make when buying a home. Here are some of the things we learned, and expert tips to help you avoid them.

Lesson 1: Build a buyer's profile

Real estate agent, broker and writer of the newly released The Pursuit of Home: A Real Estate Guide to Achieving the American Dream, Scott Harris says doing your homework should be your first step.

"Buying a home feels like something we should know how to do, but too often, buyers go in half-cocked," he said. "They spend more time planning their vacations than what they want in a home."

Our situation was unique in that we had a retired real estate agent helping us every step of the way. But we also didn't have the hard conversations about wants either. It ended up working well for us, aside from the space issue, but that's a lesson we're definitely adopting moving forward.

The solution: If you're in a relationship, start by having a conversation about each person's values in a home. As Harris puts it, "You want to row together."

And if you're a single buyer, find an encouraging voice to help you. "You want a cheerleader during this process, not someone who's going to bring you down and question every decision you make," Harris remarked.

The goal is to set a table of expectations ahead of time of what you're willing to compromise on and what you're not willing to. This sets the stage for being on the same page when making difficult decisions about locations, budget and more.

Lesson 2: Don't always choose the first real estate agent

Your real estate agent is one of the most important decisions you'll make in the home-buying process. They should take the time to understand your needs, set expectations and negotiate on your behalf.

Choosing the wrong agent can make what should be an exciting process frustrating. Thankfully, we didn't have that issue, as our agent was a family member who knew the area and our needs well. But now that we're going to move away from the area (eventually), we'll need to go through this too.

The solution: You should interview a few agents. This will give you a chance to see who fits your needs best. If you're buying with a spouse, work together to have a few questions prepared to ask each agent.

And if you're buying alone, consult with a trusted friend or loved one about the questions you ask. Making sure you're on the same page with your realtor at the beginning can prevent many problems from arising later.

Similar to agents, make sure to shop around for the best mortgage rates. This Bankrate tool can help you compare options fast:

Lesson 3: Know when to walk away

Buying a home is a stressful process. Even when you do find a home you love, chances are there are at least a dozen others who love it, too.

Before we bought our first home, we placed offers on others. When we received those rejection calls, it started to weigh on us. And desperation kicked in.

That's what you don't want. As Harris said, "Sometimes you need to step back and give yourself some time to feel the feelings. Know that 25% of the time, those making the winning bid walk away."

The solution: As hard as it is, you can't allow emotions to influence your buying decisions.

"If you're looking at listings or going to open houses and you're not wowed by any of them, it's likely your mind's way of protecting you, since you're not emotionally ready yet," Harris said.

It's why you need to have the hard conversations with your spouse, friend or realtor. If it doesn't feel right in your gut, it's OK to walk away. It won't be easy to do so, but there's a reason you feel the way you do.

Harris added, "Keep in mind that 50% overpay for homes. Sometimes you're pushing too hard to get a deal done. "

Ultimately, buying a home should be an exciting time in your life. By doing your homework, having the hard conversations up front and shopping around for the realtor that best fits your needs, you're grounded in your decisions.

As such, you won't allow emotions to dictate your buying decisions. It will make the process much less stressful and give you the clarity you need to have confidence in the decision you make.

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Rather than hand over $400,000-plus to Uncle Sam in capital gains taxes, she's eyeing a completely different strategy — one that could not only defer her taxes but potentially triple her cash flow ... by moving her investment dollars 2,000 miles east to Atlanta.

Welcome to the world of geographic arbitrage through 1031 exchanges, where smart investors are discovering the best replacement property might not be in their backyard — or even their state.

Kiplinger's Adviser Intel, formerly known as Building Wealth, is a curated network of trusted financial professionals who share expert insights on wealth building and preservation. Contributors, including fiduciary financial planners, wealth managers, CEOs and attorneys, provide actionable advice about retirement planning, estate planning, tax strategies and more. Experts are invited to contribute and do not pay to be included, so you can trust their advice is honest and valuable.

The new rules of real estate geography

The traditional wisdom of "invest where you live" is being challenged by investors who understand a dollar of equity can work very differently depending on where it's deployed.

With remote property management technology and the rise of institutional-quality investment opportunities in secondary markets, the geographic barriers that once constrained real estate investing are rapidly dissolving.

Geographic arbitrage in real estate investing is essentially the practice of selling property in a high-priced market and reinvesting the proceeds in a lower-priced market where the same capital can generate higher yields, better cash flow or superior growth potential.

When combined with a 1031 exchange, this strategy becomes particularly powerful because it allows investors to redeploy their full equity without the drag of immediate tax consequences.

The mathematics of market migration

Let's return to Sarah's situation to see how the numbers work. Her San Francisco duplex was generating $6,500 per month in rental income — a respectable figure in one of the nation's most expensive markets.

After selling for $2.8 million, she's identified a 24-unit apartment complex in Atlanta priced at $2.4 million.

Here's where the magic happens: To properly complete her 1031 exchange, Sarah needs to reinvest her entire $2.8 million in proceeds. She structures her replacement property acquisition as a two-property portfolio: the $2.4 million Atlanta apartment complex plus a $450,000 duplex in nearby Birmingham.

Together, these properties generate about $19,500 per month in rental income — triple her San Francisco cash flow.

Moreover, by investing slightly more than her original proceeds, she ensures zero taxable "boot" — the taxable portion of an exchange that occurs when an investor receives cash or reduces debt — while maximizing her geographic arbitrage benefits.

Sarah's story illustrates more than just geographic arbitrage. She's also sidestepping California's high-tax environment — at least for the moment. California's top marginal tax rate hovers around 13.3%, while Georgia's caps out at 5.75%.

For a high-income real estate investor, this difference compounds significantly over time, especially when considering depreciation recapture on future sales.

However, Sarah needs to understand California's "claw-back" provision, which significantly complicates her exit strategy. Under California law, as of January 1, 2014, any capital gains from the sale of California property remain subject to California state tax even after a 1031 exchange into out-of-state property.

This means when Sarah eventually sells her Atlanta and Birmingham properties, she'll owe California taxes on the $1.6 million gain from her original San Francisco duplex — regardless of whether she's still a California resident.

Just as importantly, California requires Sarah to file Form FTB 3840 (California Like-Kind Exchanges) annually until she either sells the replacement properties in a taxable transaction, passes away or donates the properties to charity.

This annual filing requirement applies even if Sarah moves to Georgia and never owns California property again. Failure to file this form can result in penalties and interest charges that could significantly erode her investment returns.

The state tax chess game

One of the most overlooked aspects of cross-state 1031 exchanges involves understanding how different states treat real estate transactions and ongoing ownership.

This isn't just about income tax rates — it's about understanding the full spectrum of the full spectrum of tax implications that can dramatically impact your investment returns.

Consider Mike, a real estate developer from New York who recently completed a 1031 exchange, selling a commercial property in Manhattan and acquiring a portfolio of industrial properties across Texas and Tennessee.

Beyond the obvious income tax advantages (New York's top rate of 10.9% vs Texas' 0% and Tennessee's 0% on investment income), Mike discovered several additional benefits he hadn't initially considered.

New York imposes a transfer tax on real estate sales that can reach 1.825% in New York City. Texas, by contrast, has no state-level transfer tax. Tennessee's transfer tax maxes out at $1.25 per $500 of value — essentially negligible for large transactions.

Over time, as Mike continues to trade up through additional 1031 exchanges, these savings compound significantly — assuming he can avoid the New York claw-back provisions.

Similar to California, New York has a claw-back provision that requires if a New York property is exchanged for one outside of New York state and then later sold for cash, New York will tax the original gain.

Additionally, New York has mandatory tax withholding regulations that affect sales of real estate by non-residents, though there is an exemption available for properties sold as part of a 1031 exchange.

The claw-back problem extends beyond just California and New York. Currently, states with claw-back provisions for 1031 exchanges also include Massachusetts, Montana and Oregon.

Massachusetts' claw-back provisions require a taxpayer who exchanges Massachusetts real estate for real estate located outside the state to report and pay Massachusetts "source income" when they subsequently have a taxable sale of replacement property.

Oregon requires taxpayers to file Form 24 each year after the disposition of Oregon relinquished property until the gain is ultimately recognized.

The practical realities of remote investing

While the financial benefits of geographic arbitrage are compelling, successful cross-state 1031 exchanges require careful attention to operational realities. The 45-day identification period and 180-day completion timeline don't provide much buffer for learning new markets from scratch.

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Smart investors solve this challenge through several approaches. Many partner with local real estate professionals who understand their target markets intimately.

Others focus on institutional-quality properties with existing professional management in place. Delaware statutory trusts (DSTs) have become particularly popular for this reason, offering investors access to institutional-grade properties across multiple markets without the complexity of direct ownership and management.

Jennifer, a real estate investor from Seattle, exemplifies this approach. After selling her portfolio of single-family rentals in the Pacific Northwest, she used her 1031 exchange proceeds to acquire interests in DSTs with properties spanning Phoenix, Austin and Nashville.

This strategy gave her instant geographic diversification across high-growth markets while maintaining the passive investment approach she preferred.

Importantly, Washington state has no state income tax, but it does have a real estate excise tax (REET) on property sales, though transfers as part of properly structured 1031 exchanges are generally exempt from REET.

Due diligence across distance

Evaluating replacement properties in unfamiliar markets presents unique challenges that can make or break a geographic arbitrage strategy. Successful investors develop systematic approaches to remote due diligence that go far beyond the basic financial metrics.

Market fundamentals become critical when investing across state lines. Population growth trends, employment diversification, infrastructure development and regulatory environments all carry more weight when you can't rely on local market knowledge.

Investors need to understand not just current returns on investment and cash flow, but the underlying economic drivers that will influence long-term property performance.

The regulatory environment deserves particular attention. Rent control laws, landlord-tenant regulations and eviction procedures vary dramatically between states. A property that generates strong cash flow in business-friendly Texas might become a nightmare in a state with more restrictive landlord regulations.

Financing considerations across state lines

Cross-state 1031 exchanges often involve financing complexities that don't exist in local transactions. Lenders may have different appetites for various markets, and loan terms can vary significantly between regions.

Interest rates, loan-to-value ratios and debt service coverage requirements might differ based on both the lender's geographic preferences and local market conditions.

Moreover, investors need to maintain consistent debt levels in their exchanges to avoid boot. When moving between markets with different price points and financing environments, maintaining appropriate debt levels requires careful coordination between the investor, their qualified intermediary and their financing sources.

The timing element

Geographic arbitrage through 1031 exchanges also involves a timing component that adds both opportunity and complexity. Real estate cycles don't move in perfect synchronization across markets. An investor might be selling at the peak of their local market while buying in a market that's just beginning its recovery phase.

This timing differential can create exceptional opportunities for investors who understand how to read multiple market cycles simultaneously.

However, it also means that successful geographic arbitrage requires a more sophisticated understanding of national real estate trends than traditional local investing demands.

Risk management across markets

While geographic arbitrage can significantly enhance returns, it also introduces risks that need careful management. Concentration risk becomes particularly important when moving from a familiar local market to unfamiliar distant markets.

Currency risk doesn't exist within the United States, but economic risk certainly does — different regions can experience dramatically different economic cycles.

Successful investors often phase their geographic diversification over multiple exchanges rather than making dramatic shifts all at once. This approach allows them to build market knowledge gradually while spreading their risk across multiple regions and property types.

The future of geographic real estate investing

Technology continues to reduce the barriers to cross-state real estate investing. Virtual property tours, remote property management platforms and sophisticated market analysis tools make it easier than ever to evaluate and manage properties from a distance.

Simultaneously, the rise of institutional-quality fractional ownership opportunities through vehicles like DSTs provides access to previously unavailable property types and markets.

For investors willing to think beyond their local markets, 1031 exchanges provide a powerful tool for geographic arbitrage that can significantly enhance both current cash flow and long-term wealth building.

The key lies in understanding not just the financial opportunities, but the operational realities and tax implications that determine whether a geographic arbitrage strategy will succeed over the long term.

The next time you're considering a 1031 exchange, don't just look down the street — look across state lines. Your best replacement property might be waiting in a market you've never considered, offering returns your local market simply can't match.

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• Six Risks of Delaware Statutory Trusts in 1031 Exchanges

This article was written by and presents the views of our contributing adviser, not the Kiplinger editorial staff. You can check adviser records with the SEC or with FINRA.

In fact, the market you choose could determine whether purchasing a second home is even possible. Factors such as home prices, the local cost of living, and rental demand all play a major role in overall affordability.

We’ll explore where vacation homes offer the strongest returns, how costs vary by region, and what to know before you buy. So you can make an informed decision before signing that second mortgage.

Where vacation homes offer the strongest return

It’s not always easy to find desirable, affordable properties — but they do exist. The best places to buy a vacation home tend to share a few key traits:

• Home affordability
• Interest rates
• Available inventory
• Cap rate, or the annual rate of return on your investment

Right now, most of the top vacation-home markets with the strongest returns are beach towns along the coast, according to Vacasa’s Vacation Rental Report.

When evaluating these markets, it’s crucial to look beyond postcard views. Key indicators such as cap rate, available inventory and location stability can reveal whether a property is likely to generate consistent income or drain your budget.

The cap rate helps you compare how much income a property could produce relative to its price. Meanwhile, low inventory can drive up competition and home prices, while location affects everything from seasonal demand to maintenance costs.

Keeping these factors in mind can help identify where the numbers truly add up. Here are five vacation-home markets currently offering some of the strongest returns.

1. North Myrtle Beach, SC

The median home price is $360,747 — almost $300,000 less than the second spot. The gross cap rate for North Myrtle Beach is 8.10%. With an average annual rental revenue of about $27,600 per property.

Curious about today's rates? Explore and compare some of today's best mortgage offers with the tool below, powered by Bankrate:

2. Dauphin Island, AL

The median home price is $645,330, which is higher than the national average. However, with average annual rental revenue of $53,293 and a gross cap rate of 8%, buyers have a solid opportunity to recoup part of their investment through vacation rental income.

3. Okaloosa Island, FL

The median home price on the Gulf is $654,494, with average annual rental revenue exceeding $50,000 and a gross cap rate of 7.7%. The area attracts about 5 million visitors each year, most of whom stay four nights or longer — creating strong demand and more consistent income opportunities for vacation homeowners.

4. Hatteras Island, NC

The median home price in Hatteras Island, North Carolina, is $805,585 — nearly double the national median. While it’s a larger upfront investment than many other markets, the area’s average annual rental revenue of $58,862 and gross cap rate of 7.3% help balance the higher cost.

Hatteras also benefits from strong visitor loyalty, with more than half of bookings lasting seven nights or longer, providing steady rental income potential.

5. Girdwood, AK

Just 45 minutes outside of Anchorage, Girdwood, Alaska, offers a mountain-town escape surrounded by stunning alpine scenery. The median home price is $485,429, with average annual rental revenue of $34,797 and a gross cap rate of 7.2%.

Many visitors come for short getaways, with 61% of bookings lasting just two to three nights. Girdwood’s biggest draw is its dramatic, ice-capped peaks and proximity to the upscale Alyeska Resort.

High-cost markets with prestige — and premiums

While you’re paying for prestige, it often comes with a much higher upfront cost. Many of the most desirable vacation-home markets have median sale prices well above the $410,800 national median.

What you get in return, however, is a view-worthy property in a high-demand area — and the potential to have your home work for you. Because most vacation homes are located in popular tourist destinations, there’s typically steady demand for short-term rentals. If you plan to rent out your property, you can often charge a premium during peak travel seasons.

Still, it’s important to consider the broader community you’re buying into. You might fall in love with the scenery, but if the area doesn’t attract enough visitors to sustain demand, that dream vacation home could quickly turn into a costly liability.

Hidden costs that vary by location

Second homes are already more expensive than primary residences. You may be on the hook for putting down a larger down payment, paying a higher interest rate and getting fewer tax breaks compared to your first home.

But what you pay also varies by your vacation home’s location. For instance, Florida has 1 million second homes — 15% of the nation’s total. Florida relies heavily on tourism all over the state, from theme parks in the central part of the state to beaches that literally surround it.

Seasonal housing can play a part in how much you pay for your vacation home. Out of season, home prices can go down 5% to 10% compared to home sales during the season. But if you can secure a vacation home during off-peak times, you can reap the rewards of a potentially high rental income. And when it comes time to sell, you can list it during peak season.

The cost of owning a second home isn’t the same for everyone, since the availability of vacation homes is widely different across the country. Other factors that could impact home prices include:

• Easy access to amenities, like beaches, mountains and other nature-focused attractions.
• Vicinity to urban areas.
• Established infrastructure that’s proven it can carry tourism.

Not all second homes are in locations that have a strong community that supports tourism for out-of-towners, residents and vacation homeowners.

What it all means for prospective buyers

When exploring second home options, location matters in multiple settings. Rather than snatch up your dream home, crunch the numbers to figure out if you can afford it in the first place.

It’s also crucial to figure out the long-term financial impacts of your home, including how much you’ll spend on it during ownership and your return on investment. Look at the purchase price, ongoing costs, and how much you expect to earn, if anything at all. Making your home work for you can lessen your out-of-pocket expenses, but if you buy a home that isn’t in a prime location, you could lose out on even more.

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• Design Your Second Home to Pay for Itself
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Major cities such as New York, Los Angeles and Hong Kong remain top choices, offering a mix of financial opportunity, cultural influence and international connectivity. These markets continue to evolve, reinforcing their status as magnets for billionaire buyers.

At the same time, new hot spots are on the rise. From Miami and Dubai to Lisbon and coastal Mediterranean towns, the ultra-rich are seeking destinations that combine tax advantages, lifestyle appeal and long-term investment potential.

Why New York and other global hubs remain favorites

In the past decade, the number of ultra-wealthy individuals has surged, according to Altrata’s World Ultra Wealth Report (PDF). Among the top 10 cities they call home, New York City continues to lead, with 21,380 ultra-wealthy residents — a 23.4% increase from 2024.

Hong Kong, Los Angeles, San Francisco and Chicago follow as the next most popular destinations, while Tokyo, London, Dallas, Washington, D.C., and Houston complete the top 10. Together, these cities account for one-fifth of the global ultra-rich population.

Their dominance stems from a powerful mix of finance, culture and connectivity. These global hubs offer unmatched opportunities, making them enduring favorites for the world’s wealthiest homeowners.

Curious about today's mortgage interest rates? Explore and compare some of today's top offers with the tool below, powered by Bankrate:

The new hot spots rising fast

New hot spots also draw the ultra-wealthy. Miami has emerged as both a primary and secondary home market, with Realtor.com ranking the Miami/Fort Lauderdale/West Palm Beach metro as the nation’s second top city for the ultra-wealthy in 2025.

While Miami’s cost of living is 11.5% above the national average, 43.8% of its residents own their homes outright, which is well above average when compared with other cities. Combined with a vibrant cultural scene, prime coastal location and Florida’s lack of state income tax, Miami remains a top draw.

Expats seeking tax-friendly destinations are also gravitating toward Dubai and Lisbon. Dubai’s high cost of living is offset by the United Arab Emirates’ zero income tax and a low 9% corporate tax rate, while Portugal offers generous exemptions on many types of foreign income for up to 10 years, making Lisbon a cost-saving haven for the wealthy.

Beyond these financial capitals, Florida’s coastal towns and Mediterranean cities increasingly appeal to second-home buyers looking to split their time between luxury lifestyles and idyllic climates.

What makes these cities magnets for the ultra-rich

Several factors are fueling these luxury real estate trends among billionaire buyers. Tax incentives, from favorable laws to strategic planning, help the ultra-rich reduce their overall burdens. Residency programs also make relocation easier, while political stability adds to the appeal of certain destinations.

Lifestyle is another powerful draw. Warm climates such as Florida’s, world-class golf courses, high-end shopping districts and vibrant cultural scenes all attract wealthy buyers seeking both comfort and prestige.

Luxury real estate is also viewed as a safeguard in uncertain times. Even during economic downturns, high-end properties tend to hold their value, making them a reliable investment and a hedge against inflation.

What’s next: The cities to watch

Cities such as Austin, Aspen and Naples are also becoming ultra-rich real estate destinations. According to the Altrata report, factors such as remote working trends, lifestyle appeal and the growth of emerging technology and finance hubs makes such cities appealing.

With the rise of remote work, the ultra-rich and the general public have more available real estate options. Rather than being tied to locations by a reasonable commute, individuals who work remotely can move almost anywhere with a reliable internet connection.

Private jets give the ultra-rich the freedom to buy homes wherever they choose, while global mobility programs — when companies relocate employees abroad for short- or long-term assignments — also shape where wealthy buyers settle.

Demand in Asia and the Middle East is shifting, according to the Altrata report. Regional conflict has slowed growth in the Middle East, with only moderate gains in both the number of ultra-wealthy individuals and their total net worth from 2024 to 2025.

Asia, by contrast, is expected to see the strongest growth in its ultra-wealthy population through 2030, fueled in part by the expanding Indian economy. The Middle East is projected to post the weakest growth in that same period, highlighting a clear shift in global wealth markets.

What it means for local markets

As new real estate hot spots emerge, rising demand is pushing up prices in prime neighborhoods. While higher costs aren’t a concern for the ultra-rich, they can make these areas inaccessible for other buyers. In many cases, an influx of wealthy residents accelerates gentrification, displacing long-term communities.

Higher property values also drive up tax bills. For existing homeowners — especially elderly residents on fixed incomes — steeper taxes can lead to delinquencies, foreclosures and ultimately, being forced out of their homes.

At the same time, shifting markets create opportunities for developers and brokers. By tailoring properties and services to meet the expectations of the ultra-rich, real estate professionals can tap into a lucrative and growing segment.

Following the money

The ultra-rich often act as trendsetters in global real estate, offering clues about where wealth and influence are headed next.

Their choices, shaped by economic opportunity, culture and lifestyle appeal, can signal which destinations are poised to become the next hot markets.

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The recently published Bad HOA: The Homeowner's Guide to Going to War and Reclaiming Your Power by Southern California-based attorney Luke Carlson can keep you from pulling your hair out (and the resulting premature baldness) if you wind up with a bad HOA board.

Carlson said he wrote Bad HOA "to provide homeowners the tools to deal with often frustrating and costly situations. Still, I believe in the HOA concept and have had many highly positive interactions with boards that work to benefit all of their homeowners."

Kiplinger's Adviser Intel, formerly known as Building Wealth, is a curated network of trusted financial professionals who share expert insights on wealth building and preservation. Contributors, including fiduciary financial planners, wealth managers, CEOs and attorneys, provide actionable advice about retirement planning, estate planning, tax strategies and more. Experts are invited to contribute and do not pay to be included, so you can trust their advice is honest and valuable.

Who should consider buying in an HOA?

Carlson described the people for whom living in an HOA would be a good fit:

They prioritize property values and neighborhood stability, which are not always reliable characteristics of traditional homes/neighborhoods.

They want a group — almost like a government agency — that acts as an enforcement arm of the governing agreement all homeowners in the neighborhood sign. If homeowners have a problem, they can go to the board.

They appreciate having a safety net that is able to prevent/resolve conflicts, such as the neighbor who parks junk cars on their lawn, allows their home to fall apart or refuses to safely maintain vegetation — such as trees at risk of falling, creating risk of personal injury or property damage — that are common in traditional neighborhoods.

They want uniform rules about home colors and property modifications to prevent changes that could adversely impact neighbors or their property values. When everyone is required to have nicely maintained homes and yards, Carlson notes, the community is enhanced.

Who would not be well-suited to live in an HOA?

Carlson said he has found that residing in an HOA community is not appropriate for everyone. He described people who might not appreciate the restrictions:

They don't want constraints on what they can paint the exterior of their home.

They intend to run a business out of their house. That's permissible in non-HOA neighborhoods, but many associations have restrictions on operating a commercial venture from homes.

They see an HOA board as Big Brother, rather than a safety net. They don't want anyone having a say over what they can do with their house.

"You've got to know yourself," Carlson said. "Be honest and ask, 'Can I be happy with these restrictions?'"

What do bad (and good) HOA board members do?

Bad HOA lets readers know what bad HOA board members look like:

• They disregard state laws governing a board member's activity and the HOA's governing documents.
• They attempt to personally benefit from their decisions.
• They ignore their fiduciary obligations and set rules that amplify their power in the community or benefit them financially.

Carlson also lists the attributes of a great HOA board member:

• They take their obligations to the community seriously.
• They understand and follow governing documents.
• They acquire a good grasp or their state's HOA laws, and when in doubt, they consult the association's lawyer for help.

When things go wrong, keep emotions out of it

If you encounter a conflict with your HOA board, Carlson offers the same advice that most lawyers hear in law school about biting your tongue: "If issues wind up becoming litigated, HOA attorneys just love it when they can present a judge or arbitrator a homeowner's letter that screams anger and profanity.

"Always remember that whatever you put in writing to the HOA board will be read by others. So, address the issues in a logical, reasonable manner, being mindful of your emotions. Keep it clinical, factual and on point. This will serve you well."

Homeowners have power

Bad HOA shines a spotlight on the nightmares that often occur with poorly run HOAs and offers suggestions on how to deal with them.

Looking for expert tips to grow and preserve your wealth? Sign up for Adviser Intel (formerly known as Building Wealth), our free, twice-weekly newsletter.

"There has been so much media coverage about HOAs that have gone really bad," he said. "I wanted to help homeowners and potential buyers realize that if this happens, you are not condemned to being a victim of that reality. You have tremendous power."

Bad HOA, which is accessible and so well written, is the only resource I have found that offers step-by-step instructions that empower frustrated homeowners who may have thought, "I've got no power at all."

On the contrary, they do not have to tolerate the actions of a bad board or board member. They can push back against unfairness, and Bad HOA outlines how to do that successfully.

We need more attorneys like Carlson. You won't see him in television commercials, boasting about how much money he has gotten for victims of auto accidents.

Instead, he and his team devote their education and experience to helping, a goal that many of us had when entering law school, before dollar signs got in the way.

Dennis Beaver practices law in Bakersfield, Calif., and welcomes comments and questions from readers, which may be faxed to (661) 323-7993, or e-mailed to Lagombeaver1@gmail.com. And be sure to visit dennisbeaver.com.

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This article was written by and presents the views of our contributing adviser, not the Kiplinger editorial staff. You can check adviser records with the SEC or with FINRA.

A second home is typically purchased as a vacation property, though some owners also use it as a rental or investment. If you originally bought a second home for personal use but now plan to update it for Airbnb guests or long-term tenants, it effectively becomes an investment property. For simplicity, we’ll use “second home” and “investment property” interchangeably in this article.

If you’re investing in a second home, the key is making sure it pays for itself. Here are the rules to follow to ensure your property works for you — not the other way around.

1. Design a space that works for you and your guests

One of the best things about owning a second home is the freedom it gives you, you can design and use the space however you like. But if your goal is to make the property appealing to guests, whether for short-term rentals or visiting family, you’ll want to create an environment that’s both welcoming and versatile.

Start by choosing furnishings and layouts that serve multiple purposes. Look for pieces that reflect your taste while also offering broad appeal for visitors. Think comfortable, durable, and timeless. Furniture that can withstand daily use from your family as well as occasional wear from guests. Materials should be easy to clean and high-quality enough to last.

When it comes to design, keep the overall look uncluttered and inviting. Avoid overly busy or distracting décor, and instead aim for a balance of style and function. Adding thoughtful touches like extra seating options, storage that hides away personal items, or neutral color schemes with a few warm accents can help your second home feel both personal and guest-friendly.

2. Let the location guide your home’s style

If you’re turning your second home into a vacation rental, let the local community and surroundings guide your design choices. A cottage in a beach town, for example, can lean into light, airy colors, nautical touches, and casual, comfortable furnishings. A mountain cabin, on the other hand, might feel more inviting with rustic textures, natural wood, and cozy layers.

The goal isn’t to over-theme the space, but to capture the spirit of the area in a way that feels authentic and welcoming. Play with different design elements until you strike the right balance between your own style and what will resonate with guests. By reflecting the character of the destination, you’ll not only create a more memorable experience but also make your property stand out in a competitive rental market.

Explore and compare some of today's top mortgage offers with the tool below, powered by Bankrate:

3. Offer flexible sleeping options

While one bed in the primary bedroom may work for your own stays, it’s worth thinking about the needs of potential visitors. Flexible sleeping arrangements can make your second home more appealing to families, groups of friends, or long-term guests.

Instead of one large bed in every room, consider adding two twin beds to at least one bedroom, which can easily accommodate both children and adults. You might also incorporate a sleeper sofa, a daybed with a trundle, or even a Murphy bed to maximize capacity without sacrificing style or comfort. These options allow you to host larger groups while keeping the space practical and comfortable for your own use.

4. Choose finishes that cut down on upkeep

You can invest in quality materials without sacrificing style. Luxury vinyl plank flooring is durable, attractive, and cost-effective, while weather-resistant outdoor furniture extends the life of your patio or deck.

Inside, opt for easy-to-clean fabrics like leather or microfiber and sturdy surfaces such as wood or metal. Choosing low-maintenance, long-lasting pieces helps cut down on turnaround time between guests.

5. Add smart tech for convenience and security

A smart home is nice not just for you, but also for potential guests. There are so many ways to incorporate technology into your second home.

Smart lock

A physical key can be problematic when you regularly rent out your home. You must find a way to get the key to every new visitor staying at your second home. And if they lose it, you have to invest in getting new ones created. A smart lock is a keyless, remote-controlled lock for the front door.

As the homeowner, you can lock and unlock the door from wherever you are and give virtual keys to visitors. You can also set up alerts for activity and get notifications for who is coming and when.

Smart thermostat

Gone are the days of walking up to the thermostat and changing the temperature. Smart thermostats are on Wi-Fi, allowing you to control the temperature wherever you are.

You can set a smart thermostat at a specific temperature during the day (and at night) and turn off your air conditioning when no one is home. You don’t have to be there to do it, but rather, you can make changes straight from your phone.

Security systems

Like other smart home additions, new security systems are easily accessible through an app. You can use popular options like Ring or Google Nest, or get a system installed through a security company, like ADT or Vivint.

Whether you go the professional or DIY approach, choose one that works best with your smart home setup and has a simple user interface.

Keep backup options in mind for all your tech updates if technology falters. What’s your plan if there’s a glitch? You should be able to understand all of your tech, whether it’s restarting it or explaining the features to potential guests.

Make your second home work for you

Owning a second home can be a luxury, but it also brings extra expenses — from the mortgage to insurance, taxes, and upkeep. One way to offset those costs is by turning the property into a source of income.

With the right upgrades, your second home can double as a rental when you’re not using it. Thoughtful design choices and smart home improvements not only make the space more appealing to guests but also help your property stand out in a competitive market.

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Located in Central Florida near Orlando and home to more than 150,000 residents (who call themselves "Villagers"), The Villages, a 55-plus community, bills itself as the number-one-rated master-planning community in the U.S..

"I work with many retirees who call The Villages home, and for a lot of them, making Florida their official residence just makes sense. You get the sunshine, the lifestyle and the tax breaks that come with it," says Rob Edwards, managing director at Edwards Asset Management in Naples, Florida.

“People love to talk about the 183-day rule, but it’s not a magic number," Edwards says. "What really matters is showing that your life is based here. And for a lot of people in The Villages, that’s already the case — they’ve put down roots, made friends, started working with Florida-based professionals, and built a life that clearly says, 'This is my home now.'"

What's life like living in The Villages?

Residents agree, noting the many amenities and opportunities for social engagement with their peers.

“Weekends here are absolutely wonderful and always full of activities,” says Carole Rader, who’s lived in The Villages with her husband for the past 13 years. “We often start with potluck gatherings at our community pool or at one of our many friends' homes throughout the neighborhood.”

Of all the perks and amenities offered at The Villages, Rader's pick is the free live entertainment every night from 5 to 9 pm in one of three town squares: Spanish Springs, Lake Sumter Landing or Brownwood. "Each venue features different music styles and performers, so we can choose based on our mood for any given evening," she says.

Ask any Villager about the community’s lifestyle and you’ll hear a lot about jam-packed social calendars.

Take Karen and John Keeler, residents of the Village of Ashland, who like to start their weekends with Saturday morning golf at one of The Villages' executive courses.

"After golf, we always go to one of the Squares, where there are a variety of restaurants, and have lunch with our golf partners," Karen Keeler says. "After lunch, we come home and may take a dip in our pool, or read a book or do our Bible study."

If the Keelers aren’t golfing, they’ll hit the pickleball court at one of the recreation centers nearby.

"The Villages is known as the Pickleball Capital of the World because we have so many seniors playing on the hundreds of pickleball courts that are available in every village," she explains.

The Keelers say that because they have so many friends in the community, going to someone's house for cards and dinner, is a common occurrence. "The thing is," says Karen, "every day in The Villages seems like a weekend."

How do you buy a home in The Villages?

With more than 70,000 homes in The Villages, you have plenty of choices when it comes to buying a property.

"One of the great things about The Villages is that it has a variety of home price points," says Jennifer Beeston, executive vice president at mortgage lender Rate.com in Coral Springs, Florida. "Unlike a traditional neighborhood where most of the houses cost the same, in The Villages, you have homes ranging from $300,000 all the way above $1 million."

Beeston says she's worked with multiple clients who wanted to make the area their retirement destination. "Generally, they visited a friend there once, and once they did, they were hooked," she says. "I have yet to have a client who wants to move from The Villages. I think that for people who want some level of social activity and really want a community, it’s a tough place to beat."

In the past year, resale prices typically ranged from $250,000 to the low $600,000s, with newer builds commanding higher premiums.

"HOA-style fees, known as amenity fees, average around $189 per month,” says Leah Miller, a marketing strategist at Versys Media who regularly conducts studies on community-based living.

“Property taxes are modest compared to many coastal states," she notes, "but home insurance in Florida has become a major factor. Policies can run from $3,000 to $6,000 annually, especially with the increased hurricane risk and carrier exits.”

What taxes will you pay in The Villages?

The Villages' combined home sales tax rate is 7% in 2025, including state, county and city taxes. The Villages itself has no sales tax. Median annual tax bills are higher than in most U.S. states, reflecting higher home values. Dollar-wise, the yearly median tax bill in Sumter County (where The Villages is located) was $3,834 in 2024.

It’s generally beneficial for retirees to establish Florida residency. “Florida has no state income tax, no estate or inheritance taxes, and homestead protections,” Miller says.

“For retirees drawing from 401(k)s, pensions or Social Security, it can mean significant savings. That said, some may choose to retain primary residency in their home state for proximity to family, voting access, or tax reasons specific to their retirement income sources.”

The homestead tax exemption, only allowable for residents who declare Florida homes as a permanent residence, can reduce a property’s taxable value by up to $50,722 for the 2025 tax year, but the exemption will be recalculated each year based on the Consumer Price Index.

Some specific homestead exemptions for residents age 65 and older, with specific annual income limits, can also be granted in the state of Florida.

What health care is available in The Villages?

Residents have easy access to medical care, with primary, specialty care and care centers only a golf cart away. The community also offers high-end care at its UF Health Spanish Plaines Hospital. Urgent care and telehealth services are also available through The Villages’ EZ-Care Services.

All the area’s health centers accept most private health care, along with Medicare and Medicaid. Same-day appointments are easy to get, according to The Villages' website.

What are the pros and cons of living in The Villages?

Before deciding to buy a place in The Villages, it’s advisable to visit first and explore the different properties and neighborhoods, which all have their own identities and vibes.

“We built a brand-new home in the Pine Hills neighborhood, and it's been the perfect place for this chapter of our lives,” said Paul Piubeni, resident of the Village of Pine Hills, The Villages, Florida. “The Villages has grown tremendously over the years and now spans three counties, but Pine Hills maintains that close-knit community feel that we were looking for.”

Rader says The Villages might actually be underrated by people who haven't experienced it firsthand. “I often describe it as 'Disneyland for Adults,' and I mean that in the most positive way possible,” she explains.

During the day, Rader and her husband make use of the numerous golf courses and pickleball courts distributed throughout the community.

“There are over 100 pickleball courts … 40-plus executive [golf courses] and about 13 to 14 championship golf courses, so there's never a shortage of places to play,” she says. “Sundays always include church services, which are an important part of our weekly routine and another way to connect with our neighbors.”

Beth Jones and her husband, Jeff, have owned three homes in The Villages since 2004 and currently split their time between the community and their Michigan residence.

“My mother lived here in The Villages in the early 2000s — and these days, not only do we live here, but my three sisters and their husbands also have homes in The Villages, and we all go back-and-forth to Michigan throughout the year,” she says.

Jones describes the experience as a continual “recess” or a giant college campus for retirees.

“It’s fun, keeps us active, and there is so much to do on any given day and any given hour. In our case, we love to golf and we dabble at pickleball,” she says. “We love music and dancing to live music on any of the town squares any day of the week, year-round. We love to socialize and enjoy all the options, clubs, classes and driveway parties in the Villages.”

At $300 each month, the Joneses’ amenity fee covers the following:

• All the basics (water, sewer, trash)
• Regular entertainment throughout The Villages
• Hundreds of pickleball courts and softball fields, plus thousands of niche clubs
• Access to all the pools and dozens of recreation centers
• Free golf on all the executive golf courses and the opportunity to play at the championship courses (for a surcharge)

As Jones sees it, a rare downside of The Villages is the massive size of the community.

“The con for some people would be that it’s too big, and during peak season, when all the snowbirds are here, the traffic and the wait time at restaurants can be a little longer than usual, but never so much that you wouldn’t still go out and enjoy everything,” she says. "You just have to have a little more patience.”

That’s a sentiment shared by other Villages residents, some of whom span two generations.

“My mother lives in an assisted living facility in The Villages, which makes it very convenient to live here and watch over her,” says Lori Duffy, a resident of Sabal Chase in The Villages. "On Saturdays, I work around the house and then pick up my mom and take her to church in the late afternoon, and usually, we enjoy going out to a nice restaurant for dinner.”

Duffy says retiring in The Villages offers a genuine quality of life: “There are so many activities to choose from that could keep you busy from morning until night.”

She also appreciates the family-friendly atmosphere in The Villages, which isn’t always the case with many retirement communities.

“One of the things I love about the town squares is that it is open to the public, which means we see young children and families,” she says. "Plus, medical clinics and our own hospital are within a golf cart ride, as well as shopping, groceries and churches. In fact, you can go most everywhere throughout the entire length of The Villages in a golf cart.”

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According to the U.S. Census Bureau (PDF), households that own their homes have a median wealth of about 44 times that of renter households, largely because of home equity. If your retirement savings feel a little tight, your house might hold untapped potential.

How and when you use that equity matters. Should you sell and downsize? Take out a loan? Rent part of it? Hold it for your heirs?

Here's how to turn that built-up equity into a retirement strategy that works for your lifestyle, needs and legacy.

Equity is wealth you can put to work

Home equity is the difference between your home’s market value and what you owe on it. If your home is worth $400,000 and your mortgage balance is $100,000, you’ve got $300,000 in equity.

For retirees who bought decades ago and stayed put, that figure could be even higher (often surpassing the size of their 401(k) or IRA).

This equity can be a source of financial flexibility. Whether you’re looking to supplement income, reduce monthly expenses or help your children with college or a down payment, your home can be more than just a place to live. It can help you live better in retirement.

Staying put: Protecting your home’s value

If you plan to age in place, using equity to preserve your home’s value should be a top priority. Preventative maintenance such as addressing roof issues early or servicing heating and cooling systems can help avoid costly repairs down the line.

Consider updates that enhance both your living space and resale value. Installing walk-in showers, adding handrails or improving lighting might not seem like value-boosting renovations, but they can make a big difference for aging homeowners.

Energy-efficient upgrades such as modern windows or insulation improvements can lower utility bills while making the home more attractive to future buyers.

Proper home insurance coverage is a must. Make sure your policy reflects current replacement costs and consider additional protection for natural disasters if you’re in a vulnerable area.

Compare some of today's best home insurance offers with the tool below, powered by Bankrate:

Downsizing or relocating: When less can mean more

Selling a larger home and downsizing to something smaller can also unlock a big chunk of equity while also cutting your monthly bills. Transitioning to a smaller, more affordable home can lead to lower property taxes, lower insurance and fewer maintenance headaches.

That freed-up equity could pad your retirement savings, cover travel or health care costs, or simply give you peace of mind knowing you have a bigger cushion. Some retirees also take the opportunity to move closer to family, downsize into a condo community, or relocate to a state with lower taxes and living costs.

Downsizing comes with trade-offs: Emotional attachments to your home, the hassle of moving and possible capital gains taxes if your home has skyrocketed in value. For many retirees, less really does mean more.

Tapping equity without selling

If selling doesn’t appeal to you, there are ways to tap into your equity without giving up your home.

• Home-equity loans provide a lump sum, usually with a fixed rate, which can be handy for one-time big expenses.
• HELOCs (Home-equity lines of credit) act more like a credit card, letting you draw money as you need it (though the rates are often variable).
• Cash-out refinancing replaces your existing mortgage with a new, larger loan, giving you the difference in cash.

Each of these options comes with pros and cons. They can be useful tools, but remember: Your house is on the line as collateral. It’s smart to run the numbers with a financial adviser to be sure the payments fit comfortably into your retirement budget.

Turning your home into income

Your house doesn’t just have to sit there; it can generate income. Renting out a spare bedroom, converting a basement into a small apartment, even building an accessory dwelling unit (ADU) on your property can provide steady monthly cash flow.

If you live in a popular tourist spot, short-term rentals through platforms such as Airbnb might also be worth exploring. But be sure to check local regulations, factor in the extra wear and tear, and think about whether you’re comfortable hosting strangers in your home.

Done right, this can be a great way to stretch your retirement income without selling the house.

Planning for the next generation

For many people, leaving the family home to children or heirs is part of the legacy they want to build. It’s worth knowing the rules so your heirs aren’t hit with an unexpected tax bill.

When heirs inherit a home, they usually benefit from what’s called a “step-up in basis,” which adjusts the home’s value for tax purposes to its current market value. That means if they sell it right away, they might owe little to no capital gains tax.

Other strategies, such as putting the home in a trust, can simplify the transfer and avoid probate. On the flip side, gifting the home during your lifetime could complicate things for you and your heirs, especially with Medicaid eligibility. An estate planner can help you weigh the best path forward.

Is it time to sell? Decision checklist for retirees

Sometimes the best option is to sell outright. If you’re weighing that choice, here are a few questions to ask yourself:

• Am I struggling to afford the upkeep, taxes or insurance?
• Would selling give me more financial breathing room?
• Do I still want to live in this neighborhood, or would I prefer to be closer to family or health care?
• What’s the tax impact of selling now?
• Do I have a plan for where I’ll go next?

Answering honestly can help you see whether selling would bring relief, or if you’d rather keep your home as part of your retirement plan.

Make your home part of your retirement strategy

At the end of the day, your home is more than just four walls and a roof. It’s a financial resource. The key is making sure your housing decisions align with your broader retirement goals.

For some, that means preserving the property and living comfortably in it for decades to come. For others, it may mean downsizing, renting part of it, or using equity to cover expenses.

For many, it’s about planning carefully so the home becomes a lasting gift to the next generation.

Whatever path you choose, your home can give you options, peace of mind and a solid foundation for the next chapter.

Related Content:

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Baby Boomers, the largest retirement generation to date, will finish shifting up to $105 trillion to heirs by 2048. And according to a recent LegalZoom survey*, 62% of what will be left behind is anticipated to be real estate or property.

But rising home maintenance costs could pose a problem for younger generations.

For instance, property values have increased “almost 27% faster than inflation since 2020,” per the Tax Foundation. And with higher home valuations, heftier property tax bills typically follow.

So will the inherited wealth be enough to support the higher costs of homeownership? Or will heirs need to sell priceless heirlooms to stay afloat?

Read on.

*Note: LegalZoom is an online legal technology company that surveyed 2,000 U.S. adults, including 1,000 Gen Z and millennials and 1,000 Gen X and baby boomers. Respondents were screened across various income levels.

Related: Could Tax Savings Make a 50-Year Mortgage Worth It?

Heirs may be unprepared for high property taxes and home costs

Per the LegalZoom survey, 42% of Young Americans don’t feel “financially prepared to keep and maintain” an inherited home left to them today. Among their top concerns when inheriting a house include:

• Property taxes. About 47% of potential heirs expect to inherit property, but 20% are concerned they won’t be able to afford the property taxes on the heirloom house.
• Maintenance costs. About 20% of young Americans are concerned about being able to maintain an inherited property after it’s passed down to them (which may include hidden home costs like home insurance and repairs).
• Property debt and legal complexities. Approximately 23% of future heirs are concerned about expensive surprises associated with a home. Mortgages, home equity loans, tax liens, and tricky legalities could intimidate heirs when inheriting a house.

So, while 62% of the older generation(aged 45 and above) surveyed by LegalZoom expect to leave behind real estate to their loved ones, only 18.6% of younger Americans in the survey actually feel “very prepared” to maintain an inherited property.

House-rich but cash poor?

Although inheriting a house may sound exciting, future generations may struggle to maintain a home left in the family will. And that’s not just because home costs are rising.

Other factors contributing to a “house-rich, cash-poor” mentality are generation-specific. For instance:

• According to a recent LendingTree study, Generation X may carry the highest median non-mortgage debt among other generations (including credit card debt, student loans, etc.).
• Millennials may struggle even more with outstanding loans. Over half have more debt than savings, according to a recent Bankrate report.
• Generation Z could face difficulty with overall financial stability. One Deloitte survey* found that 56% of Gen Zers live paycheck to paycheck.

Thus, instead of using an inherited home as a priceless heirloom, future generations may use that real estate to help them pay off debt, which may be disappointing news for those hoping to pass down a family home to be used by future generations.

*Note: Deloitte surveyed 14,468 Gen Zs from 44 different countries.

Start talking to your heirs now: Inheritance tax may be tricky

While talking about wills and estates with your heirs may be uncomfortable, it’s important to take the time now to discuss what the future looks like for your family.

Here are a few tips to get the sensitive wealth transfer talk started in your household:

• Ask your heirs questions about their financial situation. If you feel comfortable, you may want to broach topics like “What do you want your future to look like?” or “What are some of the biggest financial goals or challenges you have?” Creating a customized plan that works for all generations involved will help ensure you know how your assets will be handled after you’re gone.
• Be honest about your own financial situation. Do you still have any outstanding debts? How will taxes on your assets look for your heirs? According to the LegalZoom survey, over 50% of young Americans aren’t confident that they understand how inheritance taxes could affect their inherited wealth — you can help bridge that gap in understanding now.
• Discuss options. If your heirs aren’t very liquid, you may want to talk about the possibility of selling certain assets in the near future. You may also want to offer advice on which investments could be the best fit for their financial situation. Remember: some of the greatest wealth you can pass on to future generations is the wisdom you’ve learned through your own journey, and not just the assets themselves.

Overall, the most important component of family finance is ensuring that the plan works for everyone.

So if you haven’t had a conversation with future heirs about generational wealth, or are worried about taxes affecting your loved ones’ inheritance, make a plan to talk with your heirs and consult with a qualified estate planning or tax professional sooner rather than later.

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Answer: There can be benefits to staying in the home you know and love in retirement — the familiarity of the neighborhood, the ability to stick to an established routine and the quirks of your house that you’ve mastered by now, like that one closet door that always sticks.

But dealing with an aging home can become increasingly difficult as you age.

In a study (PDF) by The Hartford Center for Mature Market Excellence and the MIT AgeLab, 59% of homeowners age 50 and older reported that home maintenance has become more challenging for them over time. That percentage rose to 69% for those age 70 and older.

Moving to a retirement community could help alleviate the burden of home maintenance. You might find that other than some light dusting and reorganizing, you’re spending minimal time on cleaning and upkeep, and more time doing the things you’d rather be doing.

If you’re 63, you may be eying a senior living community a few years down the line. But what if you’re living in an aging house that needs repairs now? Should you invest the money for the sake of your comfort in the next few years? Or are you better off putting off those repairs, hoping for the best and reserving your money for a big move down the line?

Your comfort and safety need to come first

When you’re gearing up to make a move, it makes sense that you wouldn’t want to sink money into your current home. But Ben Mizes, real estate agent and president at Clever Real Estate, says that despite your plans to move, your near-term safety must come first, as well as your comfort.

“If the repairs will change what makes a home uncomfortable or unsafe to live in on a day-to-day basis … they’re worth doing, even if you’re moving in a few years,” he says. “Think of these as investments not in your net worth, but in peace of mind.”

Mizes says that any repairs related to electrical systems or plumbing should generally be prioritized. Any unstable flooring should be addressed, too, as it poses a safety hazard.

Alexei Morgado, Realtor, CEO and founder at Lexawise, agrees.

“You must differentiate between repairs that establish functionality and comfort vs aesthetic repairs,” he says. “I personally think it is well worth it to put money into what we term as ‘comfort and safety improvements,’ such as handrails, step-free access or adequate lighting.”

Morgado also insists that any repair that preserves the value of the property is generally worth making. If you neglect an essential repair, not only might your own safety and comfort suffer, but you might end up tackling those issues before selling your home in a few years anyway. You might as well make them at a time when they can benefit you, too.

Distinguish between repairs and upgrades

It’s one thing to fix things in your home that aren’t functioning the way they should. It’s another to make improvements to your home when you’re not planning to stick around for long.

Mizes says that if you’re moving in a few years, you probably want to avoid cosmetic upgrades such as new kitchen countertops because your likelihood of recouping your investment is pretty low.

The Journal of Light Construction's most recent Cost vs Value Report shows that many so-called desirable upgrades don't necessarily pay for themselves in terms of resale value. A midrange bathroom remodel, for example, will only allow the typical homeowner to recoup 80% of their investment at resale. A basement remodel typically results in 71% of the cost being recouped at resale.

Mizes says that if you’re going to make actual improvements in this situation, rather than just repairs, you should focus on those that are functional — such things as bathroom accessibility.

Additionally, as Mizes points out, buyers often prefer to make cosmetic changes to suit their personal tastes. If you’re thinking of moving in a few years, now’s not the time to spend on cosmetic changes, since you won’t get to enjoy them very long.

Finally, Mizes says, you don’t want to be too stubborn about avoiding repairs, thinking you’ll just make that your buyer’s problem when you sell. If there are too many obvious issues with your home, it could make it difficult to attract a buyer.

What you save by not making repairs, you might lose in the form of a lower sale price or concession.

“A $10,000 roof replacement can help you avoid a $20,000 to $30,000 discount to a buyer later down the line,” Mizes explains. That way, you get to benefit from that repair for however much longer you do decide to stay in your home.

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These benefits have become particularly attractive to homeowners recently as anticipation surrounding the interest rate cut by the Federal Reserve in September drove down mortgage rates. And that led to a surge of refinancing applications and the strongest week of borrower demand in decades, according to the Mortgage Bankers Association (MBA).

“Homeowners with larger loans jumped first,” said Mike Fratantoni, MBA’s SVP and Chief Economist, regarding their weekly survey of mortgage applications for the week ending Sept. 12 . “The average loan size on refinances reached its highest level in the 35-year history of our survey.”

But as mortgage rates slide, homeowners considering a refinance should be aware of associated tax implications to maximize any potential benefits. Here's more to know.

Are cash-out refinances considered taxable income?

A cash-out refinance enables homeowners to tap into their home equity, freeing up funds to cover expenses like college tuition, medical bills, or home improvements.

The best part of a cash-out refi is that you won’t owe income taxes on the cash received. That’s because you are borrowing against your home’s equity, and the IRS expects that you’ll pay those funds back to the bank.

Additionally, money received from a home equity line of credit (HELOC) or home equity loan is also tax-free.

Aside from being tax-free money in your pocket, a cash-out refinance could provide other tax advantages. Let’s dive in.

Permanent cap on mortgage interest deduction

One of the most popular tax breaks some homeowners claim is a mortgage interest deduction when refinancing their home loan. However, you’ll need to itemize using a Schedule A of Form 1040 to claim this deduction.

There’s also a limit on the amount you can deduct on mortgage interest. President Donald Trump’s recently enacted tax cuts and spending legislation, dubbed the ‘big beautiful bill,’ makes that cap permanent for refinanced and original home loans. But there are income limits.

For 2025 and onward, you can deduct mortgage interest on the first:

• $750,000 if single or filing jointly
• $375,000 if married filing separately

For a deeper dive into how Trump’s megabill reshapes tax breaks for homeowners, see our related story: New Trump Tax Bill: Five Changes Homeowners Need to Know Now.

Tax-deductible home improvements for a cash-out refi

There are also other cash-out refinance tax rules that impact what you can claim as a tax deduction.

For instance, proceeds from the cash-out refi used to fund capital home improvements may qualify for a deduction. Capital improvements are permanent residential upgrades to enhance your property, outlined in IRS Publication 523.

If you’re a retiree in search of home improvement tax breaks, or have a family member who needs certain renovations done to make your home accessible. Some remodeling projects may also qualify for a medical expense deduction that you must itemize.

Some popular tax-deductible home improvements may include:

• Adding a swimming pool
• Implementing a new bedroom, office, or bathroom
• Installing home security systems

As a note, some tax breaks are expiring this year due to Trump’s new tax law. For example, clean energy tax credits for home improvements are being eliminated sooner rather than later. That includes tax incentives some homeowners could claim for installing energy-efficient home improvements like solar panels.

Tax breaks for buying down your rate

When you’re about to close on a mortgage refi, you have the option to buy down your rate via discount points.

Points paid during a traditional or cash-out refinance aren’t deductible in full the year you pay them. Some exceptions may allow you to deduct points fully in the year paid, like if you use part of the refinanced proceeds to substantially improve your main home.

However, discount points paid during a mortgage refi are generally deducted over the life of the loan, so you’ll have to plan accordingly.

So, what are mortgage points?

• Points are prepaid interest, which you pay upfront to lower the interest rate on your mortgage.
• One point equals 1% of the loan amount. That means that paying 1 point on a $300,000 mortgage would cost you $3,000, and could reduce your rate by about 0.25%.

To deduct mortgage points, you must meet all IRS requirements, and they should be included as an itemized deduction claimed on IRS Form 1040, Schedule A.

Rental property tax deduction

Here’s some good news: You can also claim tax deductions when refinancing a rental property, but they are generally amortized across your refinance loan term.

The rules are slightly different. For instance, when refinancing a primary residence, you can only deduct qualified points and interest, as well as certain renovations.

By contrast, refinancing a rental property also allows you to also deduct closing costs associated with obtaining a new mortgage, like loan origination fees. Other tax-deductible costs may include:

• Application fee: These are processing fees when applying for a refinance, and may include credit report fees as well.
• Appraisal costs: An appraisal for a rental property includes an analysis of potential rental income in your designated area.
• Discount points: As mentioned, these are points purchased to buy down the rate on your mortgage.
• Mortgage insurance premiums: A mortgage insurance premium can generally be deducted as a business expense in full the year they are paid.

Ensure you consult with a tax professional to determine what may qualify as a tax break when refinancing your rental property.

When to consider refinancing your mortgage

More than 81% of homeowners have a mortgage rate below 6%, according to data from Realtor.com. That’s at least 4 in 5 U.S. homeowners with outstanding mortgages, who may not be interested in refinancing at today’s rates.

However, refinancing a mortgage may be worth considering if interest rates have fallen considerably below the current loan rate. Some folks may also be interested in a refinance if they want to change their mortgage loan term, switch to a fixed-rate loan, or want to pull cash from their home equity to fund certain expenses.

All of these reasons may sway homeowners to refinance their mortgage, especially as market rates are on a downward trend.

Before refinancing your home loan, keep track of potential tax benefits you may claim, which are generally through itemized deductions. As mentioned, some may include deductions for qualifying home improvements or closing costs of the loan.

To get the best outcome, consult a trusted tax advisor who can guide you regarding potential tax breaks associated with home refinancing.

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Ahead of the September Fed meeting, mortgage rates dropped to their lowest level since October 2024. The average 30-year fixed rate slipped below 6.5% for the first time in months, thanks to cooling inflation and growing confidence that the Fed may begin cutting rates in the coming quarter.

The reaction was immediate: refinance applications spiked nearly 60% last week — the sharpest increase in more than two years. As rates shift, understanding who stands to benefit and who may lose ground is the first step in adjusting your financial strategy.

The big winners: Homeowners and buyers

Falling mortgage rates are a welcome break for homeowners who took out mortgages during the peak-rate periods of 2022 and 2023. For those with rates above 7%, today’s environment opens the door to consider refinancing into lower monthly payments.

That relief can free up hundreds of dollars per month, offering a much-needed buffer against other rising costs like groceries, insurance and energy.

Homebuyers also stand to benefit, at least in theory. Lower rates slightly boost affordability by reducing monthly payment burdens, making it easier to qualify for a mortgage. However, inventory remains tight in many markets, and prices are still elevated. This means buyers may find some relief but not a complete reset of the housing affordability crunch.

Curious about today's rates? Explore and compare some of today's best offers with the tool below, powered by Bankrate:

The losers: Banks, investors and savers

Not everyone wins when rates fall. Banks and investors holding older mortgage-backed securities (MBS) face losses as new loans enter the market at lower yields. As older, higher-interest loans get refinanced, the value of those securities drops, reducing bank profitability and potentially affecting investor portfolios with heavy exposure to mortgage debt.

Savers, too, may feel the downside. If the Fed signals a pivot to rate cuts in response to softening inflation and economic data, banks will likely lower yields on CDs and high-yield savings accounts.

For consumers relying on those accounts for a reasonable return, the recent gains in interest income may start to decrease. The era of 5% savings rates could be short-lived if broader rate cuts materialize.

Browse some of today's best savings account offers with the tool below, powered by Bankrate:

What it means for your financial strategy

When interest rates shift up or down, it sends a ripple effect across nearly every aspect of your personal finances. That’s especially true when mortgage rates move sharply. If you're a homeowner, a buyer, or someone with money in savings, now’s the time to pause and ask: What should I do differently?

Here are a few options to consider.

Refinance math: When it makes sense.

If you have a mortgage with an interest rate at least one percentage point higher than current offerings, now is the time to run the numbers. Just make sure you factor in closing costs, loan term changes and how long you plan to stay in the home. Refinancing isn’t always a slam dunk, but for many, it could mean real monthly savings.

Diversifying savings if yields fall.

If CD and high-yield account rates start to decline, look into laddering strategies or short-term Treasury bills to lock in higher yields while they last. Consider moving a portion of savings into I-bonds or other inflation-protected assets if you’re worried about losing ground.

Big picture: why every rate move creates both opportunity and trade-offs.

Whether you’re a homeowner, a saver or an investor, every rate change reshapes your financial landscape. With another decision coming in October, now is the time to revisit your strategy, weigh the trade-offs between borrowing and saving and make adjustments that support your long-term goals.

Falling mortgage rates can provide relief for homeowners and buyers but they also bring challenges for savers and financial institutions. Instead of seeing these shifts as purely good or bad, treat them as a signal to reassess and realign your money decisions.

Related Content:

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Those who bought after 2022, when rates climbed above 6%, now have an opportunity to reassess. Lower borrowing costs can translate into real savings, but the decision hinges on timing, long-term goals and whether the math works out after closing costs.

The current surge in refinancing isn’t just about cheaper payments. It’s being driven by signs of a cooling job market, falling Treasury yields and expectations that the Federal Reserve could enter a rate-cut cycle. Together, these forces are reshaping the landscape and prompting many homeowners to take a closer look at their options.

Mortgage rates fall, fueling a surge in refinancing

On September 11, Freddie Mac reported a 15-basis-point drop in mortgage rates from the previous week — the largest weekly decline in the past year. The average rate for a 30-year fixed mortgage fell to 6.35%, while the 15-year fixed dropped to 5.5%.

Homeowners moved quickly to seize the opportunity. Data from the Mortgage Bankers Association shows refinance applications climbed 60% in early September, rising from 1,010 on August 31 to 1,600 by September 7.

Why refinancing is back on the table

Several factors are contributing to falling mortgage rates. The August jobs report revealed that unemployment increased from 4.2% in July to 4.3% in August, suggesting a slowdown in the labor market. The Federal Reserve often cuts interest rates to help drive employment, and a rate cut could help drive mortgage rates down further.

Additionally, the Treasury yield, which can reflect interest rates, recently dropped to 4.04%. The 10-year Treasury yield, which is the borrowing cost the government pays over a decade, tends to closely correlate with mortgage rates. The recent drop in the Treasury yield means that mortgage rates will likely drop, too.

The falling mortgage rates are a welcome reprieve from the high-rate environment of the past 24 months. Beginning in 2023, mortgage rates climbed significantly, and interest rates for a 30-year fixed rate mortgage reached 8% on October 18, 2023, according to Mortgage News Daily.

Rates hovered between about 6.5% and over 7% for much of 2025, so the recent drop offers exciting opportunities for buyers and homeowners looking to refinance.

What homeowners could gain by refinancing now

If you bought a home when interest rates were higher than the current 6.35% for a 30-year fixed rate mortgage, you could potentially save money by refinancing. When you refinance, you can take advantage of a lower mortgage rate, which means you’ll pay less in interest each month, lowering your monthly mortgage payments.

Locking in a lower mortgage rate also saves you on interest over the life of a loan. Even if the interest rate has dropped just a few points, those savings can add up significantly across the life of a 30-year loan.

When you refinance, you also have the option to shorten your loan term. For example, if you’ve been paying on a 30-year mortgage but want to pay your home off sooner, you could refinance to a 15-year mortgage to speed up the process. By paying your home off sooner, you can again save on interest.

Explore and compare some of today's best refinance offers with the tool below, powered by Bankrate:

Costs and risks to weigh carefully

As refinance applications surge, it may be tempting to join in on the refinancing movement, but it’s essential to carefully consider whether refinancing makes sense for you.

Start by carefully reviewing the costs of refinancing. You will be responsible for paying closing costs to refinance, which typically range from 3% to 6% of your mortgage balance.

If you owe $250,000 on your home and want to refinance, you could pay $7,500 to $15,000 in closing costs. Those costs can vary depending on the lender you use and the type of refinance you choose, so be sure to shop around and compare costs.

Calculating the refinance break-even point can help you determine if refinancing makes financial sense. The break-even point occurs when you start saving money as a result of refinancing your home.

To start, add up all of your costs of refinancing, then determine how much money you’ll save each month. Divide your refinancing fees by the amount of money you save per month to determine how many months it will take before you start saving money.

For example, if your fees total $7,000 and you’ll save $350 a month, you’ll divide 7,000 by 350 for a result of 20 months. In this scenario, you’ll start saving money in just under two years.

Make sure that you meet the requirements to refinance, too. It’s a good idea to have built up at least 20% equity in your home before you refinance. While some lenders will allow you to refinance with less, they will typically require you to carry private mortgage insurance, which will eat into your savings.

It’s ideal to have a strong credit score, too. The better your credit score, the better the chances of a lender offering you the lowest available mortgage rate. It’s also important to keep your debt-to-income ratio as low as possible. That ratio affects your credit, plus each lender may require borrowers to meet specific debt-to-income ratio requirements.

Consider the timing of refinancing, too. If you’re planning to move in just a few years, refinancing may not make sense, especially if you could be moving before you meet that break-even date. If you refinance your mortgage and move soon after, you might never recoup the money you paid for your closing costs, ultimately losing money thanks to a refinance.

Is this window temporary?

The falling mortgage rates may be temporary. Economic instability from a volatile market and unpredictable tariffs could prompt interest rates to increase. If inflation continues to climb, the Federal Reserve might choose to keep interest rates higher to help fight inflation, which could result in higher mortgage rates.

Since it’s difficult to predict how long lower rates will hold, many homeowners are weighing their options now. The recent drop has already sparked a surge in refinancing, but future moves by the Federal Reserve and broader economic shifts could change the picture quickly.

For borrowers, the key is understanding how long it might take to benefit from a refinance and whether it aligns with their financial goals — especially in a market that could shift again in the coming months.

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If you have enough savings, you don’t necessarily need a mortgage to make the purchase. All-cash offers are still common, and they can make transactions faster and more attractive to sellers. But draining your savings may leave you without a financial cushion.

The real question is whether it makes more sense to pay cash for your second home or finance it with a mortgage. Both options come with trade-offs in flexibility, tax advantages and long-term costs.

Should you pay cash for your second home?

Buying a home is often the largest purchase you’ll make in your lifetime, and some buyers are in a position to cover the cost entirely in cash. According to the National Association of Realtors (NAR), 28% of all home sales last summer were all-cash transactions.

About 16% of those were for second homes, showing that many buyers are skipping financing altogether when purchasing a vacation or investment property.

By November, the share of all-cash purchases dipped slightly to 25%. Even with that decline, cash buyers continue to represent a significant portion of the market. These figures highlight how common it is, and how competitive it can be, for buyers with available funds to sidestep the mortgage process and secure a property outright.

Curious about today's rates? Explore and compare some of today's top mortgage offers with the tool below, powered by Bankrate:

Pros and cons of buying a second home in cash

Paying in cash comes with clear advantages, but it isn’t without drawbacks. Here’s what to weigh before deciding if an all-cash purchase is right for you.

Pros

• No decades-long interest charges. You’re off the hook from paying interest on your home, which could cost you more than the home itself. If you were to buy a $400,000 second home today with a 6.5% interest rate and put down 10% — $40,000 — you’re looking at about $2,742 as your monthly payment. At the end of your 30-year loan, you’ll end up paying $819,160 for that home — $459,160 of that in interest.
• Fewer fees. Paying in cash eliminates many of the costs tied to financing, such as loan origination, appraisal and lender-related closing fees. While you’ll still need to cover standard expenses like title fees, transfer taxes and insurance, the overall transaction typically costs less than if you were taking out a mortgage.
• Outright ownership. A mortgage means your lender technically owns your home until you’ve paid off your loan. Without a mortgage, you own the home in full, giving you more options if you want to sell it quickly.
• Faster purchase. Sellers like all-cash offers, since they don’t have to be at the mercy of financial institutions approving or denying potential buyers. It makes for quicker, smoother transactions and could put you at the front of the line for a hot property.
• Potential discounts. Some sellers may offer an all-cash discount if you pay for the property in full, rather than going through mortgage lenders, which could trigger more costs and fees.
• Spending freedom. Without a monthly mortgage payment, you can use that money you would’ve spent on a home loan towards other wants or needs, like investments and savings.

Cons

• Less cash flexibility. If you’re draining your savings to buy a second home, you have very little to pay for other needs. Without a cushion, you could end up borrowing for emergencies, whether unexpected repairs, car maintenance, or a health concern.
• Fewer tax benefits. While second homes don’t offer as many tax breaks as primary residences, you can still qualify for some relief. For instance, you can deduct mortgage interest, up to certain limits.

Pros and Cons of buying a second home with a mortgage

While many second homebuyers pay for their property in cash, not all do. In some cases, taking out a mortgage might be a better option.

Pros

• More financial wiggle room. Even if you can pay a sizable chunk of your home purchase in cash, taking out a small loan provides financial relief in the first few months of ownership. What if you need to cover major repairs or you want to make significant upgrades? Think about what you’ll need money for after the purchase.
• Tax incentives. Even though you’re making monthly mortgage payments on a second home, you can take advantage of the mortgage interest deduction on your taxes.
• Builds creditworthiness. While taking out a mortgage causes a temporary dip in your credit, having a home loan on your credit report looks good to potential creditors in the future, who may look at your report to gauge your creditworthiness.

Cons

• Long-term interest and fees. Taking out a mortgage means paying interest until your loan is paid in full. There’s a chance you could pay off your loan before the terms are up, lessening how much you pay in total interest. But you might get hit with a prepayment penalty if you pay it off too soon.
• Ongoing monthly payments. Unless your first home is paid in full, you’ll add another mortgage payment to your monthly budget. If you can afford the new payment, this should be fine, but you may need to rework the numbers if it's tightening your finances.
• Longer closing process. The homebuying process can take a few weeks to a couple of months. Taking out a mortgage puts you at the mercy of a financial institution that approves or denies your final application.

Deciding how to fund your second home

If you have the cash to buy your second home in full, that’s a great way to avoid the mountain of interest and fees that come with a mortgage. You’ll also have the peace of mind of owning the property outright.

Not everyone has the financial freedom to make this leap, though. And even if you do, a loan can still make sense if it helps you preserve savings, take advantage of tax deductions, or keep more flexibility in your overall finances.

Related Content

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For homebuyers, the shift offers a chance to secure a mortgage at a more affordable level than what we’ve seen in recent months. Lower borrowing costs can translate into smaller monthly payments and, in some cases, the ability to consider a wider range of homes.

Homeowners who purchased when rates were higher may also see an opening to refinance. A lower rate can cut monthly expenses or help shorten a loan term, giving borrowers more flexibility as they manage their finances.

Dipping mortgage rates are promising for buyers

After years of mortgage rates hovering at or above 7%, there’s finally relief in sight for homebuyers. According to Mortgage News Daily data, average rates for a 30-year fixed mortgage dropped to 6.28% on Monday, September 8 — down from 6.53% just a week earlier.

It’s a welcome shift for both buyers and homeowners looking to refinance. Rates had climbed as high as 7.26% in January and 7.08% in May, so the recent drop could mean lower monthly payments and make homeownership more affordable.

How the jobs report lowered mortgage rates

On Friday, the Bureau of Labor Statistics released its jobs report for August with disappointing results. The unemployment rate increased to 4.3%, compared to 4.2% in July. Employers added just 22,000 jobs in August, indicating a slowdown in the labor market.

There are many potential reasons for the poor jobs report, including economic uncertainty generated by tariffs. The back-and-forth nature of the tariffs make it difficult for businesses to strategically plan, so businesses may be less likely to hire.

Additionally, inflation results in higher prices, and consumers are starting to limit their spending, impacting business profits and potentially resulting in staffing cuts.

Though the jobs report indicates trouble for the economy, it correlates with declining mortgage rates, and it could help lower interest rates even further.

Cutting interest rates can help boost the job market, making operational costs cheaper for businesses, but increasing interest rates helps fight inflation. Given the poor jobs report, the Fed might decide to lower interest rates to help boost employment, which could drop mortgage interest rates even more.

The perks of lower mortgage rates for homeowners and buyers

Lower mortgage rates could make it easier and more affordable for buyers to purchase homes, and that could mean that sellers receive more offers on their homes. Lower mortgage rates could prompt more buyers to enter the market, driving sales and increasing demand.

Homeowners may also choose to refinance a mortgage to take advantage of the current lower interest rates. Refinancing at a lower interest rate can lower your monthly payments by reducing the total interest you’ll pay.

If you’re struggling to make payments, you might choose to extend your loan term when you refinance. Alternatively, if you want to pay off your mortgage faster, you could refinance to take advantage of a lower interest rate while choosing a shorter loan term to pay off your loan sooner.

Just keep in mind that you'll pay a fee to refinance your home, and that can vary depending on the type of refinancing you choose and your new loan amount.

Explore and compare some of today's top refinance offers with the tool below, powered by Bankrate:

Additional ways to get lower mortgage rates

While mortgage rates may be falling, the actual interest rate you receive depends on several factors. You can take steps to maximize your chances of getting the lowest interest rate possible:

• Build your credit score. Lenders review your credit score and offer lower interest to borrowers with higher credit scores. Focus on making all of your payments on time to improve your credit score.
• Make a larger down payment. Lenders assume less risk when you make a large down payment, so they may offer you a lower interest rate. Plus, making a large down payment reduces your monthly mortgage payments and means you’ll pay less interest over the life of your mortgage.
• Reduce your debt-to-income ratio. A lender will also review the amount of existing debt you have compared to your income. If you have lots of debt, it can indicate that you’re at a higher risk of not being able to pay your mortgage, so lenders may charge you a higher interest rate to make up for some of that risk. Focus on paying off debts and working to increase your income.

If you’re ready to buy a home, take time to consider how much mortgage you can comfortably afford and get pre-approved so you’re prepared to make an offer when the right property comes along.

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In part one of this series, I discussed the risks associated with forced Delaware statutory trust 721 UPREIT conversions.

These types of conversions make investors exchange their DST interest for REIT operating partnership units, erasing the investor's option to choose whether or when to cash out or continue deferring taxes.

Now I will discuss the flip side of these forced conversions and describe why the fully optional UPREIT conversions are far superior and what investors should know before investing in any 721 UPREIT exchange.

Benefits of traditional DSTs with full liquidation options

The traditional Delaware statutory trust investments, which don't involve an automatic UPREIT (umbrella partnership real estate investment trust), offer investors what many believe to be a more straightforward, investor-friendly exit path.

1. Full-sale liquidity and investor control

A classic DST has a defined business plan to sell the property outright after a holding period — typically about five to 10 years. When the DST goes full cycle and liquidates, investors receive cash proceeds from the sale of the real estate in proportion to their ownership​.

Kiplinger's Adviser Intel, formerly known as Building Wealth, is a curated network of trusted financial professionals who share expert insights on wealth building and preservation. Contributors, including fiduciary financial planners, wealth managers, CEOs and attorneys, provide actionable advice about retirement planning, estate planning, tax strategies and more. Experts are invited to contribute and do not pay to be included, so you can trust their advice is honest and valuable.

This provides a clear potential liquidity event — you get paid out in cash rather than being locked into a new vehicle. At that point, you control your own destiny, including deciding what to do with the proceeds.

You might choose to reinvest into another like-kind property via a 1031 exchange to continue deferring taxes — this could be another DST or a regular piece of real estate you'd purchase on your own, or take the cash (and pay the applicable capital gains tax) if that better suits your needs​.

This flexibility means you aren't obligated to stay invested if market conditions or your goals have changed.

In a traditional DST, the investor has the freedom at exit to either cash out completely or roll into a new investment — whichever makes the most sense for them. By contrast, a forced UPREIT gives you no such choice at liquidity.

2. Tax-deferred exit via a 1031 exchange

If continuing tax deferral is a priority, a traditional DST naturally accommodates a 1031 exchange at exit.

Upon the DST's sale, you can execute another 1031 exchange into any other suitable replacement property (or another DST) on the market, preserving the uninterrupted tax deferral on your gains​.

This benefit is the cornerstone of why many investors utilize DSTs in the first place — the DST structure qualifies as like-kind property under IRS rules, allowing a seamless 1031 exchange when the DST sells.

By rolling into a new property, you can keep deferring capital gains potentially indefinitely (or until you choose to cash out on your own terms).

Traditional DSTs keep the 1031 option open at each cycle, whereas a 721 UPREIT path forecloses it.

Additionally, with a traditional DST sale, you have the option not to exchange if, for example, you prefer to pay the tax and use the funds for other purposes, a valuable option that can be decided at the time of the sale.

In short, a standard DST offers maximum tax planning flexibility — you can evaluate the market and tax situation at the time of liquidation and decide whether to pursue another tax-deferred exchange.

3. Simplicity and alignment of interests

When a DST is designed to liquidate and distribute proceeds, the sponsor's interests are generally aligned with investors to maximize the sale value of the property and return profits.

The exit process is transparent — an open market sale of the real estate — with typically an independent buyer setting the price. There's no affiliated nontraded REIT transaction with complex and internally set pricing issues, as found in the forced 721 UPREIT DST investments.

For investors and committees, this straightforward outcome can be easier to underwrite and plan for. The DST ends, and investors walk away with any net cash proceeds and no strings attached.

This clear-cut result often suits investors who want control, clarity and the ability to reinvest on their own terms.

Optional 721 UPREIT DSTs can be the best of both worlds

Investing in a DST that offers a voluntary or optional 721 exchange at exit can be a best of both worlds strategy. In these structures, the DST sponsor has a REIT vehicle or portfolio available that is well-suited for a REIT, but each investor can choose at the time of the DST's disposition whether to exchange into the REIT or not.

Investor choice and flexibility. An optional UPREIT DST preserves investor control of exit timing and strategy. Rather than being automatically rolled into the REIT (a forced 721), you are given the option to participate in the 721 exchange.

You decide whether converting your DST interest into REIT units is advantageous for your situation.

This allows you to assess the REIT's performance, portfolio quality, debt exposure and terms — along with current market conditions — before deciding whether to invest.

If conditions are favorable — say the REIT is well-managed and in a financially healthy position in terms of their dividend coverage and debt levels — you might opt in.

If not, you simply decline the UPREIT and proceed with a normal cash sale (and 1031 exchange if desired) as you would in a traditional DST.

This optionality is crucial as it provides flexibility to align the exchange with market conditions and your financial goals​. Essentially, you retain control: The 721 exchange becomes a voluntary tool rather than a forced mandate.

Timing benefit and downside protection. With an optional 721 structure, you're not locked into the REIT path if the timing isn't right. Real estate and financial markets are cyclical — by the end of a DST's hold period, interest rates, property values or the REIT's liquidity situation might differ significantly from the initial plan.

Having the choice to UPREIT or not provides a form of downside protection for individual investors.

For example, if the DST is ready to sell during a market downturn or if the REIT's redemption queues are backed up, you might prefer to take the sale proceeds and reinvest elsewhere rather than accept illiquid REIT units.

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Conversely, if the REIT is performing strongly and market conditions favor holding a diversified portfolio, the 721 option is available as a convenience.

In other words, an optional UPREIT lets you time your entry into the REIT structure wisely or avoid it entirely. This flexibility can potentially improve investor outcomes by preventing unwanted entanglement in a vehicle that doesn't fit your needs.

By retaining the 1031 exit as a fallback, you can compare the benefits of joining the REIT vs using your proceeds for other opportunities.

The mere presence of an investor option often incentivizes sponsors to ensure the REIT option is attractive (since they must earn your participation), which further protects investors from being shunted into a subpar investment.

Preservation of tax planning alternatives. In an optional 721 DST, if you choose not to contribute to the REIT, you still might receive the sale payout and can do a 1031 exchange into another property of your choice. This means the continuity of your tax deferral strategy remains under your control.

On the other hand, if you choose to UPREIT, it's because you've judged that the benefits (diversification, professional management, potential estate-planning advantages, etc.) outweigh the loss of immediate 1031 flexibility. The key is you decide based on your tax and investment objectives.

By having an optional UPREIT, you don't automatically forfeit the ability to structure your exchange or sale in a tax-efficient manner; you weigh that decision at the time of liquidity.

This is a far superior position to be in compared with a forced conversion, in which the path is set regardless of your personal tax situation or preferences.

Considerations and conclusion

When taking all the above into consideration, many of our investors — in the last nearly two decades — have decided it's clear that forced DST-to-UPREIT conversions potentially introduce significant risks — including loss of investor control, illiquidity and redemption uncertainty, opaque valuations and constrained tax planning.

Not only can these factors negatively impact an investor's ability to manage their portfolio, but they can also open the door to potentially significant tax liabilities. Investors would be wise to favor DST strategies that either maintain a traditional full liquidation or at least offer a voluntary 721 UPREIT option.

Traditional DSTs provide a clear and controlled exit (with the ability to take cash or do a new 1031 exchange), aligning with investors' need for liquidity and flexibility.

Meanwhile, optional UPREIT DSTs can offer the potential benefits of an UPREIT (diversification and continued deferral under Section 721) without sacrificing investor choice — you participate only if it makes sense for you​.

By avoiding forced UPREIT provisions, investors preserve their autonomy and can make more optimal decisions at the time of sale or exchange.

We recommend conducting thorough due diligence on any DST's exit strategy before investing and leaning toward deal structures that prioritize investor optionality and transparency​.

This approach will potentially help ensure that your 1031 exchange investment remains aligned with your financial objectives and that you're not unwittingly locked into and forced into a potentially unfavorable long-term vehicle.

It's important to clarify that forced 721 UPREIT DST programs are not inherently bad. Many are offered by well-established and reputable firms — some of which we've worked very closely with as a diversified piece for our large 1031 exchange clients.

However, investors must go in with eyes wide open and fully understand the structure and implications of a forced 721 UPREIT.

A critical step is thoroughly reviewing the final destination REIT's public SEC filings — specifically the 10-Qs (PDF) and 10-Ks (PDF) — to assess key factors such as dividend coverage, leverage ratios, debt maturities, exposure to floating rate debt and whether a tax protection agreement (TPA) (PDF) is offered, and for how long.

At Kay Properties, our dedicated due diligence team continuously monitors these metrics, which is one of the reasons why thousands of clients from across the United States over the years have relied on us to help guide them through 1031 exchanges into DSTs and 721 UPREIT investments.

Related Content

• How to Use DSTs and 1031 Exchanges for Diversification
• 721 UPREIT DSTs: Real Estate Investing Expert Explores the Hidden Risks
• Three Key Items to Evaluate When Choosing a 721 Exchange
• 721 Exchange to Defer Taxes: Pros and Cons
• Considering a 721 Exchange? Adopt a Buyer Beware Mindset

This article was written by and presents the views of our contributing adviser, not the Kiplinger editorial staff. You can check adviser records with the SEC or with FINRA.

While they may appear attractive due to their necessity in the transportation sector, the reality is that these investments are fraught with volatility, operator instability and long-term disruption risks.

In contrast, traditional real estate sectors like industrial properties, net leased properties to essential businesses, grocery-anchored retail and multifamily apartments often offer more reliable return potential and much lower operational risk.

Kiplinger's Adviser Intel, formerly known as Building Wealth, is a curated network of trusted financial professionals who share expert insights on wealth building and preservation. Contributors, including fiduciary financial planners, wealth managers, CEOs and attorneys, provide actionable advice about retirement planning, estate planning, tax strategies and more. Experts are invited to contribute and do not pay to be included, so you can trust their advice is honest and valuable.

This article explores why truck stop real estate is a high-stakes gamble — backed by real-world examples of truck stop operator failures — and why investors, especially Delaware statutory trust (DST) and 1031 exchange investors, should prioritize more resilient asset classes.

Fuel price volatility and operator instability

One of the most significant risks of truck stop real estate is its direct exposure to fuel price fluctuations.

Unlike multifamily or industrial properties, where tenants sign long-term leases and potentially pay rent regardless of broader economic conditions, truck stop operators rely on fuel sales to stay profitable.

When diesel or gasoline prices surge, margins compress, and operators often struggle to cover expenses. This vulnerability has led to numerous bankruptcies and restructurings in the industry.

For example, in 2008, Flying J, one of the largest truck stop chains in the U.S., filed for Chapter 11 bankruptcy after suffering massive losses from fuel hedging and debt obligations.

The company was forced to restructure and sell off assets, leaving landlords with uncertainty and potential vacancies.

Similarly, Petro, another major truck stop operator, faced financial distress in 2020 and underwent restructuring, disrupting cash flows for property owners.

Smaller operators are even more susceptible. The National Association of Truck Stop Operators (NATSO) has noted that rising credit card processing fees, labor shortages and competition from national chains have pushed many independents out of business.

The truck stop and fuel industry is inherently cyclical and highly susceptible to economic downturns.

As highlighted in a recent report, key investor risks include a heavy reliance on location, vulnerability to macroeconomic shifts and rising operational costs — where increased expenses for payroll and insurance can swiftly erode cash flow and profitability.

For landlords, this translates to sudden lease defaults, costly re-leasing efforts and prolonged vacancies — risks that are far less common in industrial, retail and medical real estate, where tenants have stronger credit profiles and longer-term commitments.

The threat of technological and regulatory disruption

Beyond fuel price risks, the truck stop industry faces existential threats from evolving transportation trends. The rise of electric semi-trucks (e.g., Tesla Semi, Volvo and Freightliner models) and government mandates for zero-emission vehicles will drastically reduce demand for traditional diesel pumps.

The same article cites that, unlike gas stations, which can adapt by adding EV chargers, truck stops require significant infrastructure overhauls to accommodate high-capacity charging — a cost many operators cannot afford.

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Autonomous trucking adds another layer of risk. Companies like TuSimple and Waymo are testing self-driving freight vehicles that optimize routes and reduce the need for driver-centric amenities like showers, restaurants and parking.

If adoption accelerates, truck stops could see declining foot traffic and revenue, making them less viable for tenants — and, by extension, less reliable for landlords.

These disruptions contrast sharply with industrial and multifamily real estate, which benefit from long-term megatrends like e-commerce growth, urbanization and housing shortages.

While no asset class is entirely immune to market shifts and they all contain risks, the structural demand for warehouses, apartments and grocery-anchored retail is believed by many industry experts to be far more durable than the uncertain future of truck stops.

Why industrial, multifamily and core retail are safer alternatives

While all real estate carries risk, the truck stop sector's dependence on fuel sales, operator solvency and outdated infrastructure makes it uniquely volatile. Industrial properties, for example, benefit from e-commerce growth and supply chain demand, with tenants signing 10-plus-year leases.

Multifamily housing in core markets thrives on inelastic demand for housing, with rent collections potentially remaining stable even during downturns.

Grocery-anchored retail, meanwhile, is typically considered recession-resistant, as consumers prioritize essentials regardless of economic conditions.

For investors seeking reliable cash flow potential without the roller coaster of fuel prices and operator bankruptcies, these traditional asset classes offer a far safer path to long-term returns.

Conclusion: Prioritizing stability over speculation

Truck stop real estate may seem appealing at first glance, but the risks — fuel price swings, operator failures and technological disruption — far outweigh the potential rewards.

By contrast, industrial, multifamily and core retail investments provide the potential for durable demand, stronger tenants and lower volatility.

For landlords and investors, the choice is clear: Avoid the fuel industry's pitfalls and focus on asset classes built for resilience.

Investors, whether they be 1031 exchange DST investors or direct investors, must also beware truck stop investments that have large balloon mortgages on them.

If the property has a large mortgage and the truck stop operator defaults on their lease payment, the investors will likely lose their entire principal amount invested to a lender foreclosure.

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• How to Use DSTs and 1031 Exchanges for Diversification

This article was written by and presents the views of our contributing adviser, not the Kiplinger editorial staff. You can check adviser records with the SEC or with FINRA.

But tax planning while investing is crucial. Not only can you minimize federal taxes through strategies like tax-loss harvesting, but if you live in a low-tax state, you might reduce investment taxes on your passive income.

So here are two states that could give investors a “tax-friendly” edge in the marketplace — should you decide to move.

The most tax-friendly states for investing

To determine the “most tax-friendly states for investing,” Kiplinger first ranked each state based on three key factors.

First, only states that don’t tax capital gains, income taxes, interest, or dividends were considered. Of those eight, Kiplinger selected the two states with the lowest effective property tax rates.

Property taxes were based on the most recent data provided by ATTOM Data Solutions, which surveyed property tax rates from 84.9 million U.S. single-family homes.

Lastly, state and local sales tax rates were referenced from the most recent dataset issued by the Tax Foundation.

But no matter where you move, federal income taxes will still apply.

Best states for investors who hate paying taxes in 2025

Nevada and Tennessee.

Many types of state taxes are either low or nonexistent in Tennessee and Nevada, making these two the most tax-friendly for investing in 2025.

Here are just a few reasons why Nevada and Tennessee topped our list:

• There are no individual income taxes in either state. (That includes wages, retirement distributions, and investment income on capital gains, interest, or dividends.)
• Property taxes are about half the national average of .90%. Both Tennessee and Nevada have relatively low effective property tax rates of .44% and .48%, respectively, according to ATTOM.
• Neither Tennessee nor Nevada has state-level inheritance or estate taxes. Without paying so-called state “death taxes,” you could pass on more investment wealth to your heirs.

Best low-tax states to invest in real estate, rental property, and other investment buys

However, choosing the state that offers the most potential tax benefit may depend on the type of investments you hold. For example, many types of investments generally reap similar state tax benefits regardless of whether you live in Tennessee or Nevada.

So, when it comes to naming the “most tax-friendly states for investing,” Kiplinger selected two primary types of investments: real estate and collectibles.

Your investment choices and the duration of those investments might lead you to prefer one state over another as the most "tax-friendly" for your specific investment strategy.

For instance:

• Tennessee could offer more state tax benefits to landlords than Nevada. Not only does Tennessee have a slightly lower property tax rate compared to Nevada, but the Volunteer State also has a lower overall median property tax bill of $1,695 (Nevada’s is $2,660), as reported by Kiplinger.
• This means you might save on state property taxes when renting out long-term properties (more than 180 days). (Depending on the specific geographic area, of course.)
• However, Tennessee is also one of the states with the highest sales tax rates in the U.S. Investors could pay up to 9.75% in combined state and local sales taxes, per the Tax Foundation. This includes large investments such as boats, cars, short-term rentals, and even some essential living expenses, like clothing.
• On the flip side, Nevada's maximum sales tax rate is 8.375%. This translates to potential savings of up to $1.37 per $100 spent on purchases in Nevada compared to those in Tennessee. Plus, Nevada has no statewide short-term rental tax, meaning state taxes on vacation rentals can be lower compared to Tennessee.*

*Note: While there is no statewide short-term rental tax in Nevada, counties and cities may enact local tax rates and fees.

Is Nevada or Tennessee a good place to live?

Before you pack your bags for a move to Tennessee or Nevada, there are other important factors to consider.

Kiplinger’s ranking considered state tax burdens for investors; however, you may want to research other key considerations like cost of living, crime rates, and political climate before relocating.

• For example, Nevada is generally considered a “business-friendly” environment, with no corporate income tax rate, which may appeal to entrepreneurs. At the same time, the state faces challenges in healthcare access, quality, and outcomes. Nevada recently ranked 46th in a national report released by The Commonwealth Fund.
• Meanwhile, Tennessee has a generally low cost of groceries, housing, and transportation compared to national averages. However, the Volunteer State has struggled with higher-than-average poverty rates in recent years, according to the U.S. Census Bureau.

Of course, you can live in your home state and buy an investment (like property) in another. But if you do that, you’ll likely need to file two state tax returns, which could increase the cost of your tax return and make your financial situation more complicated.

Overall, it’s important to consider your unique financial and lifestyle circumstances when planning a move to another state.

Because even if Nevada or Tennessee is the most tax-friendly for your investments, if those places don’t work for your family, your home state may be the perfect fit after all.

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Answer: As of 2022, the typical 57-year-old had $185,000 in retirement savings, according to the Federal Reserve.

If you’re 57 with $4.1 million socked away for your later years, you’re in remarkably good shape. This holds true whether your intent is to retire abroad or not, as both have pros and cons from a financial perspective.

However, you might wonder if it pays to continue funding your 401(k) plan at this stage if you plan to retire abroad in a few years. You’ve probably got enough savings that if you were to work a bit longer and let your balance grow, you’d be well-positioned to retire in your early or mid-60s.

Halting those 401(k) contributions, meanwhile, means freeing more money to spend in the near term.

There are some big drawbacks to pulling the plug on 401(k) contributions, even with plenty of savings in your pocket. It’s important to weigh your options carefully.

Hitting stop on your savings means giving up benefits

It’s one thing to retire on $4.1 million at 57 and another thing to stop funding a retirement account at 57.

Although 57 isn’t such a young retirement age, it could mean having to stretch your nest egg further. If you’re thinking of retiring in your 60s and are simply looking to stop funding your 401(k) during your last few years of working, that’s a different story — and a lot less risky.

Still, Brett Bernstein, CEO and co-founder at XML Financial Group, says it’s important to recognize that there’s really no such thing as having too large a 401(k) balance.

“I believe one shouldn’t make a rash decision to pull the plug on contributions to a retirement plan based on their age or account value,” he says. “A well-thought-out, holistic financial plan should be created to determine if you need to continue contributing to a retirement plan to meet your retirement goals.”

Aaron Cirksena, founder & CEO of MDRN Capital, also cautions savers who have accumulated a lot of money at a certain point to consider the downside of halting retirement plan contributions.

“The real question is not ‘Can I stop?’ but ‘What do I lose if I do?’ ” he says. “Every extra [401(k)] dollar stowed away lowers your taxable income today and keeps more of your money working for you. If your employer is still offering a match, that is basically free money you would be missing out on.”

There’s also the fact that 401(k)s impose an early withdrawal penalty to think about. If you’re inclined to tap your savings before age 59½, then you might want to stop contributing to a 401(k) and focus instead on a taxable brokerage account with restrictions.

On the other hand, if you’re already 57 and are still planning to work a few more years, early withdrawal penalties might not be an issue. That makes the argument to continue funding a 401(k) at least up to the point of your employer match.

Retiring abroad changes things — for better and worse

Both Bernstein and Cirksena believe that retiring abroad should factor into the decision of whether to continue funding a 401(k).

As Bernstein says, “Retiring abroad requires some additional planning, including, but not limited to, currency conversions, fluctuations and tax considerations. Once those aspects are taken into consideration, the costs could be less.” However, he says, they might not be.

Cirksena says, “In countries with lower costs of living, your money will go further, and that can make the idea of stopping contributions feel even safer.”

However, Cirksena cautions, "Retiring abroad is never as cheap and simple as it looks. You will most likely face surprise costs like visa requirements, foreign taxes, or you may need to keep some U.S. accounts open for some reason."

He also points out that retiring abroad could mean traveling back and forth to the U.S. frequently to see friends and family, which could result in a big financial strain. That’s why, Cirksena says, “keeping up contributions, even if at a reduced level, can still make sense.”

Bernstein also notes that life can throw retirees many curveballs, regardless of where they live. Home repairs, health issues and family obligations can all eat into retirees’ nest eggs, making the argument that continuing to contribute toward retirement to some degree is a pretty smart choice.

All told, for this situation, Bernstein says the key is to make a smart decision for the future, given the unknowns of retiring abroad (or retiring in general) without denying yourself too much in the near term.

“I believe someone should save as much as they can when they can to be there for the future, but don’t save so much that you cannot enjoy the journey along the way,” he says.

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• The Best Places to Retire in the World

Inflation appears to be cooling, the job market is showing signs of softening, and at the August Jackson Hole, Wyoming, conference, Fed Chair Jerome Powell indicated that rate cuts could be on the table in upcoming meetings.

So why does this matter?

The Fed's goal is to keep the economy balanced — not too hot, not too cold. Think of it like Goldilocks' porridge: just right. The key tool it uses is the fed funds rate, which influences how much banks charge each other for overnight loans.

Kiplinger's Adviser Intel, formerly known as Building Wealth, is a curated network of trusted financial professionals who share expert insights on wealth building and preservation. Contributors, including fiduciary financial planners, wealth managers, CEOs and attorneys, provide actionable advice about retirement planning, estate planning, tax strategies and more. Experts are invited to contribute and do not pay to be included, so you can trust their advice is honest and valuable.

This rate affects a wide range of borrowing costs, from credit cards to mortgages, but it primarily targets short-term interest rates.

Longer-term rates, like those on five- or 10-year loans, are shaped by more than just Fed policy. They reflect expectations about future short-term rates, inflation and market demand.

So, a rate cut doesn't automatically mean lower long-term borrowing costs.

Given that it looks highly likely that the Fed will lower rates in the near future, it's worth considering who would benefit from lower rates, who is hurt by them, and what to do if rates are going down.

Who benefits from lower rates?

Theoretically, anyone who is looking to borrow money benefits from lower rates, but due to the nature of the yield curve (the interest rate for different lengths of borrowing), not all borrowers benefit equally.

The type of debt that is most directly affected is variable rate debt with rapid resets. Things that tend to fall into this category are home equity lines of credit (HELOCs) and credit cards on the consumer side and floating-rate loans the corporate side.

Adjustable-rate mortgages also benefit from lower rates, but after the financial crisis, their use plummeted and are fairly uncommon today.

While it is always nice to get a break when a 27.5% credit card interest rate moves to a 26.5% rate, assuming the Fed eventually implements a cut of 1 percentage point, that probably won't help many people.

Arguably, the same is true for things like home equity lines, which tend to carry higher interest than mortgages.

More affordable housing via lower rates is often cited as a reason rates need to be cut now, and home sales are at a nadir in this high-rate environment.

There are a few issues with this argument, however. Most people finance their homes with 30-year mortgages, which are more closely tied to the 10-year Treasury rate, not the fed funds rate.

As markets expected higher inflation in the future, longer-term rates actually rose last year despite Fed cuts. That same phenomenon is happening now. In other words, rate cuts may actually hurt those looking to buy a home.

If mortgage rates do drop, we could see increased demand and further home price increases, offsetting the benefit.

Unfortunately, the real solution to more affordable housing is an increased supply of homes, complemented by lower rates and lower building costs.

For those looking to refinance, lower rates would clearly help, and an increasing number of homeowners are paying high rates. The general rule of thumb is to refinance when you can save 1 percentage point or more on your mortgage rate, which may be a way off for many.

Similarly, lower rates will make car buying cheaper, and the rising number of auto delinquencies shows that this relief is needed.

Who could feel the downside of lower rates?

A surprising fact about America is that we are a net saving population. You frequently see headlines lamenting the low average savings rate of Americans (which is a sad truth), but that belies the point that we do save.

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Importantly, many older and retired people are significant savers, and much of this money ends up in investments tied to interest rates. This means that lowering interest rates actually lowers the net income of the population.

Investors living comfortably by buying CDs and Treasuries will see a drop in their disposable income. The same is true for many corporations that have large balance sheets invested in bonds.

What should you do?

Now is a great time to assess any outstanding debt and monitor when it makes sense to refinance, especially if you have a mortgage rate above 7%. As rates decline, it can become more attractive to borrow an equity line and pay off any higher interest debt, such as credit cards, as well.

More important, perhaps, is thinking about locking in good interest rates now rather than waiting. Review cash positions in your bank accounts and make sure anything above a six-month cushion is generating good interest in CDs or other high-yielding investments.

If you have significant balances parked in high-yield savings, now is a great time to buy things like Treasuries to lock in rates.

Of particular note, for those in high-tax states, municipal bonds are trading at a historical discount and offer an opportunity to get tax-free income at very compelling rates.

As the environment changes, you should actively manage your exposure to interest rates to better position yourself for what may come next.

Bradley Thompson offers securities through Equitable Advisors, LLC (NY, NY 212-314-4600), member FINRA, SIPC (Equitable Financial Advisors in MI & TN), offers investment advisory products and services through Equitable Advisors, LLC, a SEC-registered investment advisor, and offers annuity and insurance products through Equitable Network, LLC (Equitable Network Insurance Agency of California, LLC in CA; Equitable Network Insurance Agency of Utah, LLC in UT; Equitable Network of Puerto Rico, Inc., in PR). Equitable Advisors and Equitable Network are affiliates and do not own or operate New Canaan Group. PPG-8363243.1 (Exp 9/29)

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This article was written by and presents the views of our contributing adviser, not the Kiplinger editorial staff. You can check adviser records with the SEC or with FINRA.

But the reality looks different once you add in taxes, insurance and other costs.

As mortgage interest rates edge lower, buyers might feel encouraged to shop for bigger or more expensive homes. Before you stretch your budget, it’s worth running the numbers to see what a $1 million home really costs each month and in the long term.

From steep closing costs to jumbo loan requirements, the expenses quickly add up. Here’s a closer look at what it takes to afford a million-dollar home on a $250,000 salary.

Crunching the numbers on a $1 million home

Let’s take a look at the average costs of buying a $1 million home. If you make a 20% down payment of $200,000, you’ll have an $800,000 mortgage. The current interest rate for a 30-year fixed mortgage is 6.35%, according to Freddie Mac.

Assuming you have strong credit and are a low-risk borrower who gets that 6.35% interest rate, your monthly mortgage payment, including interest, would be $4,978.

That mortgage payment excludes additional expenses such as property taxes and homeowner’s insurance, both of which will vary depending on where you live.

For example, Hawaii has the lowest property tax in 2025, with a rate of just 0.32%, but rates can be 2% or higher. For this example, let’s use Oxford County, Maine’s 1.192% tax rate, which is about in the middle of tax rates in the United States.

With a 1.192% tax rate, you'd pay $11,920 each year in property taxes on your $1 million home, which comes out to $993.34 per month. If your home’s assessed value increases in the future, or if your state or county tax rate increases, your taxes will rise, too.

You’ll also need to budget for insurance. Insurance.com estimates that the national cost of homeowners insurance for a million-dollar home is $7,412 per year, but many factors will affect your insurance premiums, including your home’s location, its age and even your history of making claims. The coverage you choose will also impact your rates.

Using these sample figures, if you wrapped your taxes and insurance into the mortgage, your monthly mortgage payment would be $6,558.

You’ll face additional costs when you close on your home, too. Closing costs for buyers can range from 2% to 5% of your home’s purchase price, according to Zillow, so you could pay up to $50,000.

Additionally, thanks to a real estate commission settlement, sellers might choose not to cover your agent’s fee, so you might be responsible for paying your real estate agent a commission of approximately 3% of your home’s sale price, or about $30,000.

Let's sum it up:

• Down payment: $200,000
• Closing costs: Approximately $50,000
• Real estate agent's fee: Potentially $30,000
• Annual property taxes: $11,920
• Annual homeowner's insurance: $7,412
• Monthly mortgage excluding taxes and insurance: $4,947
• Monthly mortgage including property taxes and insurance: $6,558

Debt-to-income and lenders’ rules

Lenders want to see that you’re financially stable and a low risk to issue you a mortgage and to give you a lower interest rate. In addition to considering factors such as your income, lenders review your debt-to-income ratio, which compares your recurring monthly debt payments to your monthly income.

According to Wells Fargo, mortgage lenders often prefer a debt-to-income ratio below 35% or 36%. If you’re making $250,000 per year and are bringing home $13,500 after taxes and retirement contributions, your existing debts can’t be higher than $4,860 per month.

For example, your car payments, student loans and credit card debts can’t add up to more than $4,860 per month.

Your debt-to-income ratio also affects your credit score, which can impact the mortgage rate you qualify for. A lower debt-to-income ratio can help to increase your credit score. Mortgage lenders see a higher credit score as indicative that you’re a lower-risk borrower, so you’ll be more likely to get a lower interest rate on your mortgage.

Jumbo loans and additional costs

Depending on the size of your down payment, you might need to take out a jumbo loan to buy your home. Jumbo loans are required for single-family mortgages of more than $806,500, which is the current loan-servicing limit set by Fannie Mae and Freddie Mac.

Jumbo loans often have higher interest rates and stricter underwriting rules than a traditional mortgage, but they're available as fixed-rate and adjustable-rate loans.

Since jumbo loans are riskier for lenders, you’ll usually need a higher credit score to qualify for them. According to Capital Bank MD, you’ll usually need a credit score of at least 680 for a $1 million loan. You’ll need a debt-to-income ratio under 43% to qualify, and lenders also like to see that you have significant cash savings to ensure you can make your mortgage payments.

Explore and compare some of today's best mortgage offers with the tool below, powered by Bankrate:

Variations by market: Expensive vs affordable metros

Your home’s location not only affects your property tax and insurance rates, but it also affects overall home affordability. Certain areas simply cost more to live in than others. Metropolitan areas with strong economies, such as New York City, San Francisco and Boston have higher costs of living.

To buy a house in one of these more expensive markets, you’ll need to budget more for expenses such as food, utilities and transportation.

If you’re willing to move to a more rural area, like West Virginia, Oklahoma or Mississippi, your costs of living will be lower. You can save on everything from home repair costs to taxes, and chances are, you’ll be able to get more house for your money, too.

Finding your comfort zone with mortgage costs

Dave Ramsey recommends homebuyers follow the 25% rule, in which your monthly house-related expenses, such as your mortgage, insurance and property taxes, add up to no more than 25% of your monthly take-home pay. This rule can help ensure you’re able to comfortably afford your mortgage.

In the above example, you'd take home $13,500 per month, and your mortgage payments, including taxes and insurance, would be $6,558. That’s nearly half your take-home income, indicating that in this situation, you can’t afford a million-dollar home on a $250,000-per-year income.

There are ways to change that, though. Saving up a larger down payment will lower your mortgage payments, and you might be able to afford a home with a lower mortgage.

You might also consider moving to an area where taxes and insurance are cheaper to keep costs down.

Ultimately, shopping for a more affordable home might be the best solution so that you can comfortably afford your mortgage.

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• New ‘Taylor Swift Tax’ on Vacation and Second Homes: Is Your Home Next? | Kiplinger

Over the years those commissions ballooned to inflated levels, sparking lawsuits over whether the industry kept rates artificially high. That’s what led to a major National Association of Realtors (NAR) settlement in 2024.

The $418 million settlement was intended to bring more transparency and lower costs for sellers. But nearly a year later, the changes aren’t having the widespread impact many had hoped for.

What the NAR settlement changed

In March 2024, the National Association of Realtors (NAR) denied wrongdoing but agreed to a $418 million settlement. The NAR and other real estate companies, including RE/MAX, Real Estate One and Seven Gables, allegedly artificially inflated real estate agent commissions on home sales and purchases.

The NAR settlement was meant to tackle inflated real estate commissions. Traditionally, when a house was sold, commissions averaged 5% to 6% of the sale price. On a $400,000 home, that meant as much as $24,000 in fees — and sellers were usually responsible for paying both their own agent and the buyer’s agent.

Adding to the lack of transparency, most states didn’t require buyers to sign an agreement with the agent representing them. As a result, many buyers had no idea how much their agent was being paid from the transaction when they purchased a home.

The lawsuit alleged that NAR conspired to keep real estate commissions artificially high. As part of the $418 million settlement, the association also agreed to change how commissions are handled in home sales.

Under the new rules, sellers no longer have to specify a commission for the buyer’s agent — a shift designed to encourage more negotiation and potentially lower costs. In addition, listing agents can’t advertise commission splits on the Multiple Listing Service (MLS). Instead, sellers now negotiate fees directly with their own agent and decide whether, and how much, to contribute toward the buyer’s agent’s fees.

The settlement also introduced a new requirement for buyers: they must sign an agreement with their real estate agent outlining exactly how much they’ll pay for the agent’s services. Depending on the terms, that commission could come from either the buyer or the seller.

This change opens the door to more flexibility. Sellers may choose not to cover the buyer’s agent’s fee, leaving buyers to pay it directly. At the same time, some agents are now more willing to negotiate, offering flat fees for marketing a home or reduced commissions if buyers take on tasks like searching for properties themselves or attending open houses on their own.

Explore and compare some of today's best mortgage options with the tool below, powered by Bankrate:

How the NAR settlement actually affected real estate

The new rules went into effect on August 17, 2024. Nearly a year later, though the settlement was intended to drive down costs and increase transparency around commissions, most sellers haven’t seen a significant decrease in commissions.

A Redfin analysis found that average buyer’s agent commissions barely budged after the new rules took effect. In October 2024, the rate was 2.34%, nearly identical to 2.35% in August. By the first quarter of 2025, commissions had actually ticked up to 2.40%, compared with 2.37% in late 2024 and 2.36% in the previous quarter.

In fact, commissions have inched higher for homes priced under $1 million. For sales between $500,000 and $999,999, the average buyer’s agent commission rose to 2.29% in the first quarter of 2025, up from 2.26% in late 2024.

Homes under $500,000 saw an even bigger jump, climbing to 2.49% from 2.46% in the fourth quarter and 2.42% in the third.

Why commissions haven’t come down

The settlement’s policy changes sounded promising, but they haven’t had much impact in practice. Real estate agents don’t operate with a fixed pay structure, yet many are still accustomed to the traditional model and have been slow to adopt new approaches.

Another hurdle is awareness. Most people don’t buy or sell homes often enough to stay current on industry best practices. That’s why having a strong team of professionals — from your real estate agent to your mortgage lender and insurance advisor — is key to navigating the process and making sure you’re not leaving money on the table.

Know what you’re paying for

If you’re planning to sell a house, discuss fees with your real estate agent at the beginning of the process, and make sure you sign a document outlining those fees. This is also the time to discuss whether you’ll be responsible for the buyer’s agent’s fees, and what those may be.

Your real estate agent should welcome your questions and be able to clearly explain every part of the process of buying or selling a home. They’re your partner in this journey, so find an agent you’re comfortable with and whom you can trust.

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But while shedding a mortgage payment could free up room in your budget as a retiree, that doesn't mean you won't have other homeowner expenses to deal with, like property taxes, maintenance and insurance.

The problem is that even with a paid-off home, your costs of ownership could rise in retirement, causing financial stress and making it difficult to keep up. It's important to understand the costs of continuing to own a house — and to take steps to protect yourself financially when possible.

Don't assume you can't fight your property taxes

In August, the Federal Housing House Price Index measured a 2.9% increase in U.S. home values on a year-over-year basis. When home values rise, property tax bills tend to follow suit, which can be a huge problem for retirees on a budget.

That's why Colton Pace, co-founder and CEO at Ownwell, a property tax appeal service, says older homeowners need to be informed about property tax relief programs.

"In most states, seniors 60 or 65 and older can lower their property taxes through homestead exemptions and property tax freeze programs," he says.

"For example, in Texas, homeowners can combine a general homestead exemption with a senior exemption and a tax ceiling that freezes school district taxes once they reach 65," Pace continues. "Florida, another popular state for seniors and retirees, offers a similar setup."

If you're older, it pays to check with your state's Department of Revenue or Division of Taxation to see what programs you might qualify for. Your local tax assessor may also have that information.

And remember, even if you don't qualify for a property tax freeze, you can always appeal your property taxes on the basis that your home assessment is too high.

Pace also points out that recent changes to the SALT (state and local tax) deduction could spell relief for some homeowners in high-tax states.

"Under the One Big Beautiful Bill Act, the SALT deduction cap was temporarily raised through 2029 to $40,000," Pace explains. The previous limit was $10,000.

However, he warns, "You can only deduct property taxes if you itemize deductions on your federal tax return." There are also income limits associated with this new rule, though they're quite high.

Homeowners in states that include Connecticut, New York, New Jersey, Massachusetts and California may benefit the most from this change, according to the Bipartisan Policy Center.

Keep shopping for homeowners insurance

Homeowners insurance can be a huge expense for older homeowners – especially when home insurance costs keep going up. Bankrate reports that the average U.S. homeowners policy costs $2,408 per year for a $300,000 dwelling limit.

If you live in a state where homeowners insurance costs keep rising (like Florida, where natural disasters are all too common), or if your personal costs keep going up for some reason, it's important to shop around for a policy every year. You may be eligible for a discount based on your age or other factors.

Budget carefully for maintenance

Although property tax and insurance costs can rise from year to year, on a 12-month basis, they're usually locked in, making it easier to budget as a retiree. It's maintenance and repairs that often push older homeowners to their breaking point.

State Farm says a good rule of thumb is to set aside 1% to 4% of your home's value for maintenance each year. But as your home value rises, that requires you to continuously increase your budget.

That, however, may not be a bad thing, since homes tend to need more work as they get older. And if your home is older already, you may need to start with the upper end of that 1% to 4% range.

If you want to make sure you'll be able to afford to stay in your home long-term, you may want to create an emergency fund for home repairs and maintenance specifically. Generally speaking, it's a good idea for retirees to hold enough cash to cover one to two years of bills in case there's a market event that sends portfolio values plummeting. Having dedicated funds for home-related costs takes some of the pressure off.

As Pace says, "All homes require upkeep, ranging from affordable fixes like deep cleaning to more expensive jobs like roof or foundation repairs. Ignoring urgent needs can lead to hazards and bigger bills down the road."

Pace says you may also want to be careful when making home upgrades – something you may be inclined to do as a retiree if you'll be spending more time at home.

"Adding a room or installing a pool will likely increase your home's assessed value and raise your property taxes, which can further deplete your retirement savings," he explains.

It's a matter of priorities

As a retiree who owns a home, it's best to expect that your costs will rise continuously from year to year. There are steps you can take to mitigate that, like looking into property tax programs, shopping for homeowners insurance annually, and having separate funds for maintenance and repairs.

But at the end of the day, if your home-related expenses are eating too heavily into your budget, there may come a point when downsizing makes sense.

Ultimately, you'll need to ask yourself what takes priority – flexibility in your budget, or staying put. There's no right or wrong answer, but it pays to consider a move if the stress of keeping up with your home outweighs the benefits of living in it.

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IMPORTANT MEMORANDUM

TO: All 1031 exchange, 721 exchange UPREIT and Delaware statutory trust investors
FROM: Dwight Kay, founder and CEO of Kay Properties & Investments
SUBJECT: Risks of forced DST-UPREIT conversions

EXECUTIVE SUMMARY

In recent Delaware statutory trust (DST) offerings, some sponsors include forced Section 721 UPREIT conversions into perpetual-life REITs (non-traded REITs) at the end of the DST's hold period.

Under this structure, investors receive potentially illiquid REIT (real estate investment trust) operating partnership (OP) units instead of cash.

Kiplinger's Adviser Intel, formerly known as Building Wealth, is a curated network of trusted financial professionals who share expert insights on wealth building and preservation. Contributors, including fiduciary financial planners, wealth managers, CEOs and attorneys, provide actionable advice about retirement planning, estate planning, tax strategies and more. Experts are invited to contribute and do not pay to be included, so you can trust their advice is honest and valuable.

This memo outlines the key risks of forced UPREITs (umbrella partnership REITs) and explains why investors should prioritize traditional DSTs or DSTs with fully optional 721 UPREIT elections.

Here are four key risks of forced DST 721 UPREIT conversions:

1. Loss of control over exit

In a forced DST 721 UPREIT scenario, investors have no choice in the exit strategy — you must exchange your DST interests for REIT operating partnership units on the sponsor's terms​.

The timing and terms might not align with your personal financial strategy, and you effectively lose flexibility to choose whether or when to cash out or continue deferring taxes.

Investors are essentially locked in to the UPREIT without the ability to change course or pursue a different 1031 exchange at sale​.

Investors who participate in a forced 721 UPREIT put themselves into a situation in which they won't be able to evaluate the health of the final-destination REIT at the time of the 721 transaction.

This is problematic because the final-destination REIT might appear healthy at the time of the DST transaction, but when the DST is called into the 721 exchange transaction in a few years, the final-destination REIT could potentially have a completely different financial picture and risk profile.

2. Limited liquidity and redemption risks

Non-traded, perpetual-life REITs resulting from a 721 UPREIT conversion offer very limited liquidity compared with a straightforward property sale. The partnership units you receive are illiquid — they're not publicly traded and can't be quickly converted into cash.

While many non-traded REITs offer periodic redemption programs, those programs are typically restricted and not guaranteed as per the REIT's offering documents. Such share redemption plans can be capped, oversubscribed, even suspended, especially in times of market stress​.

Regulators often caution investors that non-traded REITs often involve a lack of liquidity and sometimes include uncertain early redemption provisions for investors.

In a forced UPREIT, this means you could be unable to liquidate your investment on your own timetable. Even worse, if many investors seek to redeem, the REIT might simply halt redemptions, as has occurred with some large perpetual-life REITs.

You give up the assured liquidity of a sale, and your ability to cash out depends on the REIT's limited redemption policies (which the REIT can alter or pause at its discretion).

Many of the largest non-traded perpetual-life REITs have gated their liquidity provisions. Investors who might have been told they would have access to liquidity by their financial adviser can be stuck with an illiquid real estate offering. It could take them months or years to access liquidity.

3. Valuation opacity

A perpetual-life DST-sponsored REIT often uses internally assessed net asset values (NAVs) for its shares, which introduces valuation opacity.

Since there is no active market setting a transparent price, investors must rely on sponsor-provided and commissioned appraisals or NAV calculations, which can lack the transparency of open market pricing​.

In a forced conversion, you surrender a straightforward payout (sale proceeds at market value) for an opaque stake in a larger portfolio.

Looking for expert tips to grow and preserve your wealth? Sign up for Building Wealth (soon to be called Adviser Intel), our free, twice-weekly newsletter.

Determining what your new REIT units are truly worth can be difficult, and the valuation can be subject to conflicts of interest, as the sponsor is on both sides of the DST-to-REIT transaction. This opacity can obscure whether you're getting fair value for your DST property.

In contrast, a direct property sale to an unaffiliated third party establishes a clear market value for your investment.

4. Tax deferral risks

While a 721 UPREIT conversion itself is generally not a taxable event, it can introduce complex tax risks down the line.

Once you hold REIT operating partnership (OP) units, you can no longer do a 1031 exchange on that investment, as OP units don't qualify as like-kind property for 1031 purposes.

This means a forced UPREIT effectively cuts off your ability to continue deferring capital gains tax via future 1031 exchanges.

As a result, your tax deferral will end when you eventually liquidate your REIT units. Any conversion of your OP units into REIT shares or cash redemption is a taxable event that will trigger the capital gains you had deferred​.

In other words, the tax bill is delayed but not eliminated, and you'll encounter it again when exiting the REIT. You'll also lose control of the timing of that taxable event.

If the REIT later forces a merger or compels conversion of your OP units to common shares, you could be hit with a poorly timed taxable capital gain.

There is also the risk that the REIT's operating partnership might sell the underlying property you contributed, and without careful structuring or tax protection agreements, such a sale could unexpectedly trigger taxable gains to you as an OP unit holder​.

In summary, a forced UPREIT can create an inevitable tax liability and take away the 1031 exit ramp that DST investors often rely on to continually defer taxes.

Many DST 721 UPREIT sponsors clearly state in their offering documents that they won't provide a tax protection agreement to their investors.

This would leave the investors exposed. If the REIT were to sell its DST property that the DST investors contributed via a 721 exchange to the REIT, it would be forced to pay capital gains taxes on that contributed property.

In part two of this series, I will discuss the flip side of these forced conversions and describe why I firmly believe fully optional UPREIT conversions are far superior and what investors should be aware of before investing in any 721 UPREIT exchange.

Related Content

• 721 UPREIT DSTs: Real Estate Investing Expert Explores the Hidden Risks
• How to Use DSTs and 1031 Exchanges for Diversification
• Considering a 721 Exchange? Adopt a Buyer Beware Mindset
• DST Exit Strategies: An Expert Guide to What Happens When the Trust Sells
• Six Risks of Delaware Statutory Trusts in 1031 Exchanges

This article was written by and presents the views of our contributing adviser, not the Kiplinger editorial staff. You can check adviser records with the SEC or with FINRA.

On its own, that tax might not get a lot of attention. However, the new levy, which supporters say would help address housing shortages and fund affordable housing programs, has been trending on social media, after being nicknamed the “Taylor Swift tax.”

Just to be clear: Swift is not directly involved with the tax, but reportedly owns a sprawling $17 million mansion in the upscale Watch Hill area of Rhode Island, which would be subject to the new measure.

As a result, the property tax fee puts the Ocean State at the forefront of a growing movement to tax owners of high-end vacation properties.

So the question on some homeowners’ minds is: Could a similar so-called "Taylor Swift Tax" be coming to your property in another state? Here’s more to know.

What the ‘Taylor Swift Tax’ means for vacation homes in 2026

Under what is officially called the Non-Owner Property Tax Act, the following will take effect in Rhode Island as of July 1, 2026:

• Rhode Island’s new tax will impact second homes valued at $1 million or more as of Dec. 31st of the tax year and not used as a primary residence or rented out for at least 183 days per year.
• The surcharge applies to every $500 of assessed value above $1 million at a rate of $2.50 per $500.
• So, a $3 million second-home owner could face a surcharge of approximately $10,000 annually, in addition to regular property taxes.

The surcharge is designed to encourage owners to either use their properties more frequently or make them available for rent, reducing the number of empty houses. According to state officials, the tax base will adjust annually for inflation starting in 2027.

While the tax targets all non-owner-occupied properties over $1 million, the association with Swift’s beachfront estate has made the nickname stick in headlines.

For example, for Swift’s Watch Hill mansion, the tax will add approximately $136,000 annually, reportedly nearly doubling the current property tax bill for that property.

Why Rhode Island is leading the way

In Rhode Island, coastal towns have experienced soaring home prices and a shortage of affordable housing. Some say wealthy absentee owners contribute to this by buying second homes, which have driven prices up, leaving homes vacant for large parts of the year.

Some lawmakers see the “Taylor Swift tax” as a win-win approach: generate new revenue to invest in affordable housing and nudge absentee owners to either use or rent their properties more regularly.

But not everyone is on board. Some real estate agents and some residents say that the tax unfairly penalizes people who already pay substantial property taxes and contribute significantly to local economies.

• The argument is that many of these second homeowners, including long-time families and investors, are vital patrons of local businesses, restaurants, and services, even if they don’t live there year-round.
• Critics also worry that the surcharge could chill the market, forcing some owners to sell and potentially harming towns that rely on second-home tourism revenue.

Will other states follow and increase property taxes on vacation homes?

Rhode Island isn’t alone on this. Similar surcharges on expensive vacation homes and second homes have been proposed or enacted in states like Montana and localities in California and Massachusetts.

Montana: Starting in 2025, Montana implemented a graduated property tax system that increases rates on luxury homes and non-primary residences. Homes valued above $1.5 million face a tax rate of 2.2%, higher than the lower brackets for more modest homes. This new structure was signed into law by Gov. Greg Gianforte.

Cape Cod: Cape Cod is considering a 2% transfer fee on luxury home sales over $2 million to help fund affordable housing. The proposal, backed by local leaders and housing advocates, is currently under review by the Barnstable County Assembly of Delegates. If approved, the fee could generate up to $56 million annually to support year-round housing for working families, seniors, and young people.

L.A. “mansion tax”: As Kiplinger has reported, Los Angeles’ Measure ULA in California, the so-called “mansion tax,” was approved by voters in 2022 and took effect in April 2023. As of July 1, 2025, it imposes a 4% transfer tax on property sales between $5.3 million and $10.6 million, and a 5.5% tax on sales above $10.6 million, reportedly generating hundreds of millions of dollars for affordable housing and homelessness programs.

As state and local governments look for new revenue streams, these models could offer a framework for states looking to balance tax fairness and affordability in the housing market.

Rhode Island ‘Taylor Swift Tax’: What homeowners need to know

If you own a second home in Rhode Island — or are considering buying — take note of this tax change. Owners planning to keep their properties mostly empty may face a steep surcharge starting in mid-2026.

To avoid the tax, owners may have to either make the home their primary residence (spending at least half the year there) or rent it out for the majority of the time.

Whether the so-called “Taylor Swift Tax” succeeds will be a story that “Swifties,” homeowners, and policymakers will watch.

In the meantime, pay attention to key tax changes in your state and consult a trusted tax professional to understand how any changes might impact your bottom line.

Read More

• The Mansion Tax: Do You Need to Worry About It This Year?
• Most Expensive States to Live in for Homeowners
• No Capital Gains Tax on Home Sales Coming Soon? What You Need to Know