Buying a vacation home is a little different than buying your primary residence. It could be a great purchase that gives you a great return on your investment. It could also be a major loss if you aren’t careful. Before you consider buying a vacation home, think of the following factors so that you can make the most of your purchase.
Know the Area
Even though you aren’t going to live in the area full-time, you should still know the area that your vacation home is located. This is important for several reasons:
- There is a high risk of theft when the home is vacant. You want to make sure the home is in an area that is safe as well as occupied. With a lot of neighbors and people milling around, the risk of a break-in can be lower.
- You may want to rent it out when you aren’t using it. You want the home to be attractive for renters. If you buy a vacation home out where no one really visits, you may not have any luck renting it out, which could hurt you financially if you counted on that income.
- You want it to be convenient for you. When you buy a vacation home, you should buy it in an area that you visit often. If it’s a hassle to get to from your primary residence, you may use it much less than you anticipated.
Know the Actual Costs
If you own a primary residence, you know there are more costs than just the mortgage. You have to look forward and think of the full cost of owning a second home. Think of things like real estate taxes, homeowners insurance, association dues, maintenance costs, and repair costs. Also, don’t forget about the cost to furnish and decorate the home.
Depending on the home’s location, you may also need recreational vehicles or other items to have at the beach, snow hill, or any other type of environment that the home resides. Try to be proactive in estimating the costs and don’t go low. It’s always good to budget high so that you know beyond a reasonable doubt that you can afford the home.
Know Your Plans
Be realistic when you think about how often you will visit the home. If it’s located within a reasonable distance, you may visit it often. If not, you may visit it less than you think. But distance isn’t the only factor. Consider your future plans. Do you have kids? Are they in activities? You may find that you can visit the home less than you anticipated, especially as they get older.
Know the Resale Value
While you can’t predict the future to determine how much a home will be worth, you can look at the historical data. Did homes in the area regularly appreciate or did they stay stagnant? How often do people move in and out of the area? Is it primarily a vacation area or are you buying within an area where people live year round? These are factors that affect the home’s resale value. You want to know what your possibilities are, especially if you get into financial trouble and have to get rid of the home quickly.
Remember, houses are not liquid. It could take many months for you to sell it. If you know it’s in a popular area that holds its value, you’ll at least have the benefit of knowing that the home has a chance of selling fast and for a value, that leaves you with some type of profit.
Know the Rules
Finally, you should know the rules that the subdivision or associate requires. If you are buying a condominium or townhome, you’ll have to discuss your desire to rent out the home to the association. They may or may not allow this.
Other areas have specific programs that run the vacation rentals. You may have to furnish the home a specific way or the company may even handle renting out your property but for a fee. You need to know these rules up front to see if it’s something, you can handle and something you even want have. Any rental fees that come out of your profits just made the vacation home more expensive.
Make sure you cover all of your bases when looking at buying a vacation home. While it sounds dreamy, there are many factors you must consider. Once you look at all aspects of buying the home, you can then figure out if it is right for you.