Tips for Buying a Vacation Home
April 8th, 2016
With real estate prices in many desirable vacation spots around the world still in recovery mode after the tough market of 2008, for many buyers it’s the ideal time to buy a second home. Before you sign on the dotted line for that time share you were thinking about — and you probably already know that’s a bad idea — here’s what you need to consider to make the most of your free time and your investment.
Location Still Matters Most
When you bought your primary residence, you probably spent a lot of time choosing a location — after all, you can change everything else. When buying vacation property, you need to spend even more time reviewing your options. Is the beach house you love located in a frequently flooded plain? Is the ski-on trail for that fabulous mountain chalet too difficult for beginners? Will it be tough to replace appliances, buy groceries or source home repairs? What about the property taxes? Most of all, have you spent enough time in the location to really know it well, and would you consider making the home your primary residence? If you can answer the question of where to buy a vacation home with certainty, then you’re in the right place.
Chances are if you’re even considering buying a vacation home, then you are financially secure. But if you have to take on a large mortgage to pay the bills — and you haven’t factored the maintenance costs into your thinking — then you may want to reconsider. Many second homebuyers pay in cash because they don’t want to worry about payment problems. If they have a loan, then they rent out the house to vacationers and pay the mortgage back fast. Unlike your primary residence, which is also an investment, your second home falls squarely in the “want” category. If cash flow is a concern and you worry about having to unload the property quickly, think carefully before buying a vacation home.
Try Renting First
If you think you’ve found a location and you believe you’re financially secure enough to afford it, rent a home you’d consider buying in the place you love for the season. See how much time you’ll really spend there, and find out if the neighborhood you like meets your expectations for quality and upkeep. This way, you won’t find out too late that the property association’s maintenance workers are lax or that the ‘hood is home to wild partyers every holiday break. You can also find out how much you need amenities such as a gym, golf course, swim, tennis and clubhouse. If you don’t use those things when you rent, move on to a location that won’t charge you extra for the privilege.
Talk to Your Accountant
You are probably familiar with the tax benefits of owning a home. But those rules often only apply for a primary residence and not a second home. Before you assume you’ll be able to deduct mortgage interest and other expenses, talk to your accountant. Then you’ll understand the ramifications buying a second home will have on your financial picture.
The most important tip for buying a vacation home? Relax and have fun — after all, you’re on vacation.