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How to Buy a Vacation Home

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How to Buy a Vacation Home

A vacation home is the dream for many, the idea of escaping everyday life, leaving your troubles behind, and enjoying a much-needed break in a home of your own, bliss! Before you jump in headfirst some of the aspects you need to consider are the price, how much will you actually use it, are you prepared to rent it out, and most importantly where do you see yourself vacationing every year?

Firstly, consider the pros and cons of owning a vacation home:

  • Its an investment that should hopefully increase in value, especially if it is near the beach or with amazing views.
  • You can earn money by renting it out to other vacationers, and why not! Consider Air BnB or similar options to help re-coup some money and to ensure the house isn’t sitting empty for too long.
  • You’ll save money on future vacations. Flights, hotels, transport, it all adds up so the benefit of having your own accommodation takes a large cost away.
  • You can enjoy longer vacations, and if you work from home as so many do these days then you might be able to work from your vacation home.

Negatives might include:

  • Vacation homes can be costly. You must pay another mortgage, property taxes, and utilities along with all the costs of your primary residence.
  • Extra costs on another home may mean that you are unable to save for other things. Will you still have the ability to save for kid’s college fund, retirement, etc.
  • You will have to maintain a second home and keep it secure. If the property remains empty you need to consider things such as pipes freezing, critter damage, and all-round security for the time it is empty.
  • Will the novelty of a vacation home wear off? Will you get fed up with vacationing in the same place or will you want a change of scenery? If you are spending all your time and money maintaining the 2nd home you may not have the ability to travel elsewhere, will this be frustrating?

So how do you feel after considering the pros and cons of your future vacation home? If you are still sure it is for you then consider the numbers. Be sure you can afford two mortgages, calculate extra expenses such as HOA fees, mandatory landscaping, and think about any hidden costs to help you make your decision. It’s no use taking the plunge if you can’t afford it, nobody wants a miserable vacation! Make sure that when you vacation in your beautiful new home you are not feeling remorseful about your decision.

Consider the amount of down payment you may need to stump up. Securing a second home may require you to pay 25% or higher in the down payment so make sure you have a clear understanding on what you can offer before you start picking out that house on the waterfront or with the beach view. Know your limits and stick to them, don’t over stretch.

Speak to a professional about taxes! This is important so you are not taken by surprise at the last minute. Taxes vary depending on the use of the home, a tax break depends on whether you are really using the home. If you buy a vacation home and it’s not really used it may not be classed as a second residence but an investment which means different taxes apply, taxes also apply for renting. A tax professional can help you figure out what your true costs will be and whether it is worth your investment.

When you look back over this blog you will see a pattern is forming – vacation homes can be costly, everything boils down to costs, can you afford it, costs, costs, costs! Buying a primary residence is costly enough so just be extra sure that buying a second one is not going to break the bank. A vacation home should be the place you look forward to escaping to and relaxing with family and friends, it definitely shouldn’t be the place you regret buying.

Posted in Uncategorized on September 9, 2021 at 4:27 am.

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