Pied-a-terre (properly pronounced “pee-AY-dah-TARE”) is a French term meaning “foot on the ground.” Essentially, a pied-a-terre is a vacation home. They are often used as a weekend or part-time residences. These are mostly found in large cities like London, Paris, and New York. London is the No. 1 spot for finding a dream pied-a-terre with New York coming in at a close second.
Owning a vacation home is a dream for many people, but it’s typically only a possibility for those of us with a substantial amount of disposable income. For those on the fence about buying a one, there may be benefits to investing in a second home.
Before buying a pied-a-terre, it’s important to know that the process can be complicated and may come with certain rules and regulations.
Things to Consider Before Buying a Pied-a-terre
If you’re looking into purchasing a pied-a-terre, you may want to consider buying in a co-op. Although co-ops have many benefits, many co-op buildings do not allow technically the residence to be a pied-a-terre because they require the building owners to be full-time residents. However, if you’re considering renting out a co-op property, look for one that allows short-term rentals or lets the residents be away for most or part of the year.
Likelihood of Sale
People sometimes purchase pied-a-terres as an investment with the intent to sell. If the real estate market is on an upswing, eager investors may purchase a second home in an up-and-coming neighborhood and wait for the value to inflate.
While this is a sound option, there are a few stipulations with this type of investment. Some of the properties have an HOA or are condos or co-ops, which often restrictions and rules that may alienate a large segment of potential buyers.
Keep in mind that a second home also involves different mortgage and tax rules. If it is used as an investment property, the IRS will tax it as income. If it’s simply used for vacation purposes, you’ll still be taxed, though not quite in the same way. The IRS provides plenty of information on pied-a-terre taxes.
Can I deduct pied-a-terre rent?
Maybe. You can deduct the mortgage interest even if you rent it out. But you can only do that if you use the residence for a total of 14 days, or more than 10% of the number of days it is rented out, depending which is longer.
Who benefits from a pied-a-terre?
A pied-a-terre can be very pricey. But it may be beneficial for someone who enjoys a particular vacation spot seasonally and would like to rent it out for part of the year.
Retirees also benefit from a pied-a-terre as they can more evenly split their time between their homes. Frequent business travelers may also benefit from a second home if they travel to a particular place often.
Many upscale pied-a-terres include luxurious amenities similar to a hotel. You may find swimming pools, spas, rooftop bars, a 24-hour concierge service, and a doorman.
Before Purchasing a Pied-a-Terre…
Thinking of buying a pied-a-terre? Start by making a list of what is important to you in a second home. The checklist may include these questions.
- Is this property available to rent when not in use?
- What are the rules surrounding remodeling the property?
- Is the property pet-friendly?
Buying a pied-a-terre isn’t for everyone, but it may be for you. If you’re looking to invest in a property where you can spend a couple of weeks to a few months a year and make money on it when you’re not there, this may be the trick.
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