COVID-19 kept many of us sequestered in our homes for more than a year, and now that we’re finally beginning to come out of the pandemic, we’re booking vacations, and lodging is filling up fast and getting expensive. If your lifestyle allows you to get away on a regular basis, the thought of buying a vacation home may be on your mind.
If you’ve done your research and have determined that you’re able to take on the responsibilities of a vacation home, that’s great! We hope you get much enjoyment out of it. But if you’re in the beginning stages of exploring your options, there are some things you may want to take into consideration before you take the next steps.
Setting A Budget
A home is major investment, we all know that. And if you’re already a homeowner looking to take on the responsibilities of a second home, there may be a lot of number crunching going on in your head as you work to figure out a budget.
Unless you plan on paying in cash, you’ll generally be required to put forth at least 10 percent as a down payment on a second home, according to www.bankrate.com, which is more than what may be required for a down payment on a primary residence. And just because you won’t be there around the clock, you’ll also want to factor in utilities, maintenance, insurance, HOA dues, and any other additional expenses.
And then there’s one thing that’s certain in life: taxes. Have you done your research on property taxes in the community you’re interested in? If you’re already paying property taxes on your primary residence, the last thing you’ll want is a surprise tax bill on your second home.
Location, Location, Location
This is important. Ask yourself these questions during the process:
- Have I considered how easy or difficult it will be to get to the location of my vacation home?Everybody has their own opinion on what they consider “difficult,” but it is worth keeping in mind. Will you need to book a flight and carve out a day’s worth of travel each time you head to your destination? Or can you hop in your car on a Saturday morning and be there within the hour?
- Have I considered adverse weather that affects the region and what kind of insurance I’ll need to protect my investment? Each part of the country is prone to some sort of adverse weather including tornadoes, hurricanes, wildfires, etc. Educate yourself about the weather conditions in the area you’re looking at and how it could affect your property down the road.
- Have I considered how much I really enjoy this location? Maybe you can’t get enough of the ocean views along the Florida coast. That’s great! But over time, will tourist traffic get on your nerves? Or will you become bored of that area? These thoughts may not be on our minds initially, but could pop up over time, so they are worth taking into consideration. The last thing you would want to do is lose interest in your property and the community around it.
Maintaining The Home
We mentioned this when suggesting a budget for a vacation home, but it’s important. Maintaining the home you live in may be a lot of work by itself, let alone maintaining another home you have to travel to.
If your vacation home is long distance, do you have a plan in place when it comes to keeping it maintained? Will you hire a property manager to keep tabs on your home and contract people to do yard work and other maintenance? Or maybe you have a friend or relative in the area that will take care of the property. It’s crucial to have a plan in place ahead of time so you’re not left scrambling in the case of an emergency.
Don’t Assume You’ll Be Able To Rent Out Your Vacation Home
In addition to using your home for your personal enjoyment, maybe you’re looking to make a little cash off it when you’re not occupying it. If this is your intent, there may be some implications if you’re planning on financing, so be up front with your mortgage specialist to see what your capabilities are. You’ll also want to check and see if there are any local restrictions on using your property as a rental, so check with the HOA or local government beforehand.
And the COVID-19 pandemic set the perfect example as vacations came to an abrupt halt. You may not always find someone to rent your home, so, if you are planning on bringing in a certain amount of income off rentals, you’ll want to plan for the worst, that way you won’t be left scrambling if you come up short.