Are you thinking about buying a vacation home rather than spending money on annual vacations in other parts of the country or the world? Are you worrying that vacation plans may continue to be interrupted for the foreseeable future? While it may sound like a great idea, purchasing a vacation residence is a huge financial decision. Here are some tips to keep in mind before you sign that offer to purchase.
1. Don’t rush your decision!
Location, view, features and other amenities determine whether a vacation home is a wise investment - or a financial disaster. Would you prefer to spend more time skiing or soaking up the sun? Do you love mountain air or the salty sea breeze? Remember, this is a long term financial decision. Don’t get caught up in the excitement of the moment and end up buying a log cabin on a lake when you are really more of a villa on a golf course kind of person.
2. Calculate the costs!
Don’t bite off more than you can chew. In addition to a possible mortgage payment, you’ll need to pony up for real estate taxes, homeowner’s insurance, ongoing repairs and maintenance, management costs, utilities, and HOA fees if you purchase in an association or condo complex. You may also need to furnish the property if you don’t find something that is totally turnkey.
3. What is your main motivation?
Are you thinking of renting the property, either long or short term? Renting out your home can mean constant cleaning and an inconsistent income stream. If your property is not local, you’ll need to hire a management company or someone to watch for any issues and prepare the property for move in and move out. Plus, to earn top dollar, you’ll need to open up your home to renters during peak season—the same time you’ll likely want to be there. Finally, many associations have rules regarding if you can rent, to whom and for how long. It may turn out that the rules preclude your earning any real income.
4. Does distance matter?
While you may love the idea of a slope-side condo in Colorado or a high-rise apartment in Miami, don’t underestimate the difference between a two-hour drive and a multi-hour flight. An accessible vacation home will inevitably be used much more often than a place a couple time zones away. Plus, if your motivation stems from worries about current or post-pandemic travel, purchasing far from home doesn’t make sense.
5. Find a Realtor and a lender who are familiar with the area
Use the skills and experience of a local agent and lender. You’ll need an agent who is familiar with different neighborhoods, association rules and market conditions. Local lenders will be comfortable with appraisals, can help with different funding options and will be experienced with lending in rural areas. You want to be sure your purchase goes as smoothly as possible.
6. Priceless Time
A second home can function as a retreat away from the hustle and bustle of everyday life and worries. Regular vacation time can help you recharge your batteries and live a happier, healthier life. It can provide a wonderful spot to gather with family and friends, and create lasting memories to cherish.
7. Added Benefit
If you’re planning to retire and downsize in a few years, buying a second home now can help you ease into the next stage of your life. When it’s time to retire and sell your primary residence, your retirement space will already feel like home!
So, are you ready to start looking for that vacation home? I’ve got experienced real estate colleagues all across the country. Give me a call and we can get the process started!