Buying a Vacation Home
This article guest written by Jim Mckinley. Check out Jim’s website here: MoneyWithJim.org
Buying a Vacation Home? Read This First
Many Americans dream of buying a vacation home. According to the 2017 report of the National Association of Realtors, 6 percent of older home buyers (aged 62 to 91) own one or more vacation homes. The reasons for owning a vacation home are as varied as the buyers. For example, some retirees plan to spend time with family at the beach, hiking mountain trails with their partners, or escaping northern winters. You, too, can be part of this dream.
First Things First
Put your heart’s longing aside for a moment and make some tough calls. Is this a wise financial decision? Prepare a draft budget that includes purchase and mortgage fees, utilities and taxes, personal property insurance, homeowner association fees or condo fees, maintenance costs, and any other costs likely to be incurred. Don’t forget that equipping your home with kitchen appliances, furniture, and gardening tools will add to your overall cost.
If your budget seems tight. Consider renting out your vacation home when you are not using it. Subletting will provide you with additional income, meaning that you may have to make alterations to your overall budget. Just be sure to know the zoning regulations or condo bylaws of the property that you make your offer on. In your second draft budget, factor in property management fees and landlord insurance in addition to the usual costs of owning a vacation home. Renting has definite advantages and disadvantages. Renting your property has the benefit of ensuring your home doesn’t sit empty for long periods. This can mean both peace of mind as well as reduced insurance costs. However, you can expect to pay taxes on your rental income. It would be wise to speak with a tax specialist, as a second home can have significant tax implications.
Think about whether you want to own this property outright. Costs can be reduced if you opt for a timesharing or fractional ownership arrangement with other family members or good friends. Just make sure everything is in writing, including who pays for what and who is responsible for what and when. Include contentious issues such as mortgage payment due dates and maintenance responsibilities.
All homes need maintenance, from changing the furnace filter to fixing a leaky faucet to cleaning the gutters in the fall. Home maintenance is time-consuming and labor-intensive. Make decisions about who will maintain the property. Will you be able to do some or all of the maintenance? Can you afford to pay someone to maintain your vacation home?
Research, Research, Research
Next, do some internet research. Where do you want to own your vacation property? Of course, your vacation home should be somewhere you enjoy. That being said, you should be aware of some of the best and worst places to invest. Do some research into what properties are available and what the market is doing. The median price for a vacation home in 2016 was $200,000, according to the National Association of Realtors. Prices vary greatly across the country. Homes in Antioch, California, for example, typically sell for $445,000. Look at neighborhoods, local zoning laws, assessed values, and construction standards development plans and market trends. If you can, rent in the area first. Nothing reveals secrets about a neighborhood or a condo building like living in it for several months.
Narrow down your choices and consult with realtors in your chosen locations. Once you are close to making a decision, do some research into the finer details. If you have decided to rent, you will need to look closely at the rules for your property, hire a property manager, and get landlord property insurance. Be sure to obtain several quotes from both property management and insurance companies. With insurance, consider having two policies: one for your primary residence and one for your vacation property. This ensures you are protected from location-based risks. Ask about discounts and consider low-overhead online insurance services, such as Esurance.
Buying a vacation home is complicated and involves a lot of due diligence. With that said, a vacation home offers countless opportunities for fun, leisure, and adventure. By reading the above, you are well on your way to making your dream a reality.
This article guest written by Jim Mckinley. Check out Jim’s website here: MoneyWithJim.org
Thank you Jim!
