Longing to extend your vacation time and embrace the good life? Purchasing a vacation home may be just the answer. But before you take the plunge and buy a second home, consider some of these financial and lifestyle factors that may influence the type of property you choose.
Location, location, location
The number one rule of real estate still applies: Regardless of how long you intend to own your second home, the investment potential of the property and the appeal of its location should be a key consideration. “Regions near the coast and in close proximity to major metropolitan areas will likely have the best return on investment,” says Mark Fitzpatrick, CEO of RUHM Destination Marketing, “due to the high demand from high-income earners.”
Though ski resort towns and tropical islands may seem idyllic, Fitzpatrick advises caution when it comes to buying a second home in these locales due to potential volatility. “They’re great for seasonal income and perform well during good financial markets, but they may suffer more during a recession than the homes near major cities.”
Regardless of where you intend to buy, it’s a good idea to work with a real estate professional who’s knowledgeable about the local area and what future development plans or changes may be in store. If your prospective second home is located in an area that might not be accessible in the event of environmental disturbances such as a hurricane, mudslide, or heavy snowfall, consider what onsite maintenance options are available to keep “on call.”
Whether you can rent it out when you’re not there
If you intend to finance your second property or vacation home, consider that loan underwriting standards, mortgage interest rates, down payment obligations, and insurance requirements can be more demanding for vacation homes than for a primary residence. In addition, a second home will present a second set of utility bills and a second set of expenses for general home maintenance and unexpected “emergency” repairs.
If you determine that you need rental income, you may increase your occupancy rate (and, ideally, return on investment) by purchasing a property with features that are appealing to families on vacation (like a pool and/or hot tub, parking, and close proximity to local attractions). Consider using an app* like Walk Score* to provide data around a neighborhood’s “walkability” to grocery stores, coffee shops and other desirable locations.
How you want to spend your time away
If your home needs work and you decide that you want to do it yourself, apps like House Repair Talk* connect you with an online community of DIY enthusiasts who are ready to share their two cents on what it will really take to repair those hardwood floors, fix some drywall, or breathe life into a dated kitchen.
But if DIY isn’t your idea of a vacation, another option is to buy small, and look for properties affiliated with a homeowners association. Though you’ll be required to pay monthly HOA fees, they often cover utilities such as water, trash, sewer, basic repairs to shared exterior spaces (like roof and siding replacements), and landscaping needs, so you can enjoy your vacation home — free of homeowner headaches.
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