Many people dream of buying a vacation home at one of their favorite destinations. While the lure of the beach, ski or lakefront getaway is very appealing, there are some things to take into consideration before making the dream a reality.
It’s important to think through why you are purchasing a vacation home. How do you plan to use it? Is it a place for your loved ones to gather on a regular basis, or only once a year? If you’d like to use it regularly, you’ll want to choose a location that’s no more than two hours away. While a condo or house in another country may be desirable, you need to factor in travel time and expenses which could limit how often you can use the property. It’s also helpful to visit the location during different times of the year to learn what to expect based on local characteristics.
2. Don’t get in over your head
Be careful not to purchase a property that’s a financial stretch. This will cause stress and defeat the purpose. Getting a mortgage pre-approval will help guide your search. Gain a solid understanding of all carrying costs and account for year-round care and occasional repairs. Property taxes, HOA fees, yard care, trash pick-up, and utilities should all be considered.
3. Think long-term
Determine what your long-term goals are. Is the vacation home going to be used as an investment? While assets often fluctuate in the short-term, vacation properties may appreciate over time if they’re located in popular areas.
4. Consider the home’s rentability
Renting out your home can help offset some of the cost, while allowing you to build equity. Be prepared to make some concessions, like using the property during the off season. When determining rental fees, analyze features and prices of similar vacation homes nearby. Check comparable rental listings in local publications and on Craigslist. See what other landlords are charging for homes and apartments that match your property’s size and amenities.
5. Set realistic expectations
Don’t underestimate the amount of time and/or money you’ll need to set aside for cleaning, maintenance and repairs. Working on the home may not be the most relaxing way to spend your time off, but it’s a necessity if you don’t want to pay someone to do it for you. Consider the costs vs. benefits of hiring a property management company to handle the upkeep. The cost of this type of service is typically around 6 to 8 percent of the rental rate.
Owning a vacation home can be a dream come true. Carefully consider your budget and goals to help ensure that your investment enhances your lifestyle!
Contact a loan advisor near you to evaluate your options for financing a second home!
Written By Jill Henriksen