Haven’t we all vacationed in a beautiful location and thought about how wonderful it could be to own our own piece of paradise? Before you make a decision to purchase a vacation home, there are some very practical things to consider:
How many times have you visited the area?
If you think you love it there, it might be wise to dedicate many vacations to the area you may purchase in, potentially even over a number of years. When you purchase a vacation home you may feel the pressure to take most of your vacations there because of the expense of owning the property. For vacation homes located in seasonal destinations or smaller towns, will you get bored? And will you get tired of the holiday traffic and influx of vacationers? Will you be ok with spending a lot of time in one spot?
Have you gone at different seasons throughout the year?
Every destination has its prime times of the year, but how do you feel about it in the off seasons? You may want to consider a trip for each season of the year to explore the activities and the weather before jumping into a purchase. You might discover that what’s amazing in the summer is isolating and lonely in the winter. Sometimes it helps to have friends or family in the area so that you are not as lonely as you build up a new group of friends and social connections. It’s also helpful to carefully look at how much time you really will spend using the home. Would you be better off to do a seasonal rental that you can book as needed, versus taking on the responsibility of a purchase if you are not likely to visit often?
What would be the time and travel costs to get there?
Many vacation home owners choose to buy something that is less than 200 miles away, allowing them to drive rather than fly to reduce travel expense. If you must fly to your dream destination, do your research ahead of time to determine your annual travel expense. If you have grown children, will you be footing the bill to get them to come and see you? If they have young families it’s not likely they will be able to afford the expense of frequent travel, so gifts of free tickets can add substantially to your overall costs.
If you have to sell the property how difficult or easy will that be?
While only approximately 32% of vacation homes last year were purchased in rural markets, you still want to do your homework on the real estate trends and cycles in the area. And keep in mind that when we are in a down cycle in real estate, vacation homes typically can suffer significant drops in value because they are discretionary purchases, and vacation homeowners may liquidate if times get tough which will cause a glut of inventory.
What will the tax ramifications or benefits be?
The situation can be very different depending on how you intend to use the property. Will it be a primary residence? Do you plan to rent it out? Are you trying to exchange from another property? It might be wise to consult with your CPA before you even begin to shop. This may help you analyze the potential purchase from a less emotional point of view.
How much down payment will you need to purchase?
Lenders often have different underwriting guidelines for second homes, and may require that you put more money down. If you plan to rent the property out for a portion of the year, most lenders in resort markets will be familiar with this and yet will most likely be conservative on the potential rental amount they might estimate is possible. In resort markets where inventory moves slowly, you may even find current owners willing to carry financing for you. Once you connect with a top real estate agent in the area they can refer you to a quality lender and let you know what other financing options may be available to you. Again, you may want to do your due diligence before you begin actually looking at properties to help protect against impulsive emotional decisions.
Not every day will be a vacation!
When you own a second residence you may find that many of your getaway days are spent getting away to Home Depot, and that you are busy with repairs and touch ups to your home away from home. If you love to tinker and need a project this may be fun for you, but many vacation home sellers report that they were too busy taking care of the property to enjoy it. Another option, as we mentioned in this article, is to find an outstanding caretaker and pay the price to have them have it always ready for you to enjoy!
Bottom line….owning a vacation home can be a dream of a lifetime, and can create a legacy property for many generations of your family to come. With all the factors to consider, it makes sense to find a local real estate agent who is an expert in the area and can give you a good education and broad perspective to market opportunities and information critical to making a wise purchase.
For a connection to a top quality agent in the area you are interested in, contact me at 703-795-3959. Also, as a member of the Elite Agents Online Referral Network I can help you find a quality agent anywhere in North America who specializes in vacation home ownership….no cost for the service and absolutely no obligation, just free information!