Should I Buy A Vacation Home? Considerations To Make When Purchasing A Vacation Property!
If one of your New Years resolutions is to buy a vacation home, I wish you the best of luck! It’s first very important that you understand that buying a vacation home is a luxury.
If you’re in the position to be able to purchase a vacation home you should consider yourself very fortunate as many people will never have the ability to buy a vacation home in their lifetime.
Whether you’re buying a home to use as your primary residence or as a place to spend your vacations, it’s important you take into consideration many things. There are many frequently asked questions relating to buying a home, and when buying a vacation home, there are some additional things that you need to ask yourself before signing on the dotted line.
Below are the top tips for buying a vacation home. These tips should not be overlooked and should be weighed very heavily, again, before deciding to buy your vacation home!
Determine If You Can Afford A Vacation Home
Before you begin having dreams and visions of laying on the beaches of Hawaii or riding the slopes of the Rocky mountains, it’s critical that you determine whether or not you can afford to purchase a vacation home.
Whether you’re buying a vacation home, a rental property, or a home that will serve as your primary residence, the first step should be to get pre-approved for a mortgage. It’s important to understand the difference between a pre-approval and pre-qualification, first and foremost. It’s also recommended that you discuss the financing of the vacation property with a lender who is local to the area you’re looking to purchase in.
There are many reasons why getting pre-approved before looking at homes is important. When considering the purchase of a vacation home, it becomes even more important because there are different rules that apply to buying a home that is not a primary residence.
One of the biggest rules that applies in most scenarios when buying a secondary property is that a 20% down payment will be required. Many vacation homes, depending on their location, can be very expensive and a 20% down payment can be quite significant, so determining whether or not you can afford a vacation home before purchasing is smart.
Will You Take Advantage Of A Vacation Home?
One of the biggest regrets from buyers who purchase a vacation home is that they don’t end up taking advantage of it. The reality is that life can get busy and time can become vary sparse. When this happens it can get very easy to stop utilizing a vacation home.
Before you decide to buy a vacation home, it’s important to ask yourself whether or not you’ll take advantage of the home. Will you be able to visit your vacation home monthly? Quarterly? Annually? If you’re not confident that you’ll be able to make the time to take advantage of a vacation home, you need to evaluate whether it’s the right decision to buy one or not.
Another consideration to make is whether you have family members or friends that could take advantage of the home. Giving a close friend, sibling, or relative the use of your vacation home for a weekend or week would certainly be a very nice present or gesture.
Bottom line, before you decide to buy a vacation home, you need to determine whether you or others will take advantage of it or not.
What Will You Do With The Vacation Home When You’re Not There
Another tip for buying a vacation home is to make sure you have a plan of what to do with the home while you’re not there.
The first thing to consider is whether or not you will rent your vacation home while you’re unable to take advantage of it. If your plan is to rent the property you will need to figure out how you will market the home as a rental as well as determine how the property will be cleaned. If you decide to rent out the vacation home, you may want to consider hiring a local real estate management company to handle many of these details.
Another consideration to make is who will watch over the vacation home while you’re not there. The chance that a home is damaged or broken into increases significantly if it’s vacant. Similar to selling a vacant home, there are certain steps that should be taken to increase the chances the home will remain safe.
Tips such as adding additional exterior lighting, adding an alarm system, and having a neighbor keep an eye on the property can go a long way in keeping a vacant home safe.
Consider Tax Implications Of Owning A Vacation Home
Owning a vacation home can have a significant impact on your taxes. It’s important that you understand all of the potential tax implications of a vacation home.
One of the top benefits of owning a second home is the taxes can be claimed as a deduction. If you’re planning on using your vacation home as a rental during those times you’re not able to take advantage of your home, you may need to claim rental income on your yearly taxes. Generally this applies to a property that is rented out for more than 14 days in a year.
There are certainly many other tax implications of owning a vacation home. Before you start seriously looking for a vacation home, it’s highly recommended that you discuss all of the tax benefits and drawbacks with your accountant or a tax professional.
Determine Where To Buy A Vacation Home
Location, Location, Location – Determining The Location Of Your Vacation Home Is Important
When buying a home, whether it’s a vacation home or not, determining where is extremely important. Following specific tips for choosing a neighborhood when buying a home can help increase the chances that you pick a location that works for your circumstances.
When buying a vacation home, choosing the right location is critical. There are many things that can help a buyer determine whether the location of a vacation home works for them or not.
Some of the top considerations to make when determining where to buy a vacation home include;
Is it easy to get to and from the vacation home?
What method of transportation is required to get to and from the vacation home?
How long does the trip take?
Are there points of interest in close proximity of the vacation home?
The biggest suggestion when trying to determine where to buy a vacation home is to visit the location. If you’re thinking about purchasing a vacation home in Hawaii, it’s suggested that you visit there multiple times. Since buying a vacation home can be such a large investment, only visiting a destination once can be a big mistake as it can be difficult to truly know whether or not it’s the right fit in a short period of time.
Are You Better Off Renting Or Buying A Vacation Home?
One of the first decisions that should be made when considering the purchase of a vacation home is whether you should rent or buy a vacation home. It’s possible it may make more sense to rent a home a couple times a year.
Below are a few of the PROS and CONS to renting versus buying a vacation home that you should weigh to help decide whether you are better off renting or buying.
Benefits (PROs) Of Renting Versus Buying A Vacation Home:
Less upfront costs
No maintenance
No taxes
No association fees
Less liability
Drawbacks (CONs) Of Renting Versus Buying A Vacation Home:
It’s not your home and you cannot make it feel like “home”
You’ll likely need to make reservations months beforehand
No opportunity to build equity
Find A Top Real Estate Agent
Buying a vacation home is a big deal and you absolutely need an experts advice. The same can be said about buying a primary residence. It’s vital that a buyer who is looking to purchase a vacation property knows what interview questions to ask buyers agents.
Having a top real estate agent who has experience can make a huge difference when buying a vacation home. For example, if someone was thinking of buying a vacation home in the Rochester real estate market, hiring a brand new agent with little experience could end up costing a buyer thousands of dollars.
Final Thoughts
Buying a vacation home is a huge decision and shouldn’t be taken lightly. If you’re thinking about potentially purchasing one this year or in the future, please make sure you follow the above tips for buying a vacation home. It will make the decision and the process much easier than if you do not.