Have you ever thought about buying a second home? Most of us have fantasized about owning our own vacation property, but if you’re considering turning your vacation home daydreaming into a reality, it’s important to do your homework first. Whether you have your sights set on a condo in a bustling city, a relaxing cottage by the beach, or a cozy mountain cabin, there’s a lot to consider before buying a vacation home.
Chances are that you didn’t just jump into the decision to buy your primary residence, and buying a vacation home should take just as much careful thought and planning. By realistically evaluating your needs, wants, and means, you can set yourself up for a smooth home buying experience. Here are some considerations:
How much can you afford? When determining a price range for your vacation property search, be sure to factor in all of the costs involved with your purchase. Not only will you need to cover the mortgage each month, but you’ll be paying an extra set of utility bills, property taxes, and homeowners insurance as well. Depending on where you’re buying, your second home could also have additional expenses, such as HOA fees or flood insurance. You’ll also need to evaluate what it will cost to furnish the home. And don’t forget the price of maintaining it when you’re not there. Unless you plan to visit your vacation home on a regular basis, you’ll need to hire someone to routinely cut the grass, shovel snow or conduct other landscaping services. If you’ll be renting it out, you’ll also need someone to clean it before new guests arrive. And remember that your vacation home is really no different than your primary residence; appliances will break and need replacing, pipes will leak, and drains will back up. It’s important to leave some room in your budget for these types of unforeseen expenses.
Make sure you love the location. Don’t ever purchase a vacation home on a whim. While you’re enjoying a hard-earned week at the lake, it might seem like a great idea to buy your own lake house, but ask yourself if you really want to spend the majority of your future vacations there. Remember that this will be a place you return to over and over again. You’ll need to be sure you can see yourself and your family enjoying your time there for years to come. Otherwise, you’ll be looking at the stress and hassle of selling it- and if the market isn’t hot when you decide to sell, you could end up losing money in the process.
How far away is it? While you might dream of having a second home in Hawaii, or way out in the mountains of Colorado, it’s important to be realistic about how long it will take you, and how much trouble it will be, to travel there on a regular basis. If getting to your vacation home is a major challenge, chances are you won’t be able to enjoy it as often as you’d like. Remember that a vacation home is a major purchase - you want it to be worth the investment.
Can you rent it out? Many vacation homeowners offset the cost of their second home by renting it out while they’re not there. This allows them to collect rental income, and also prevents the house from being vacant for long periods of time. However, if you’re planning to rent out your vacation home, you should do your homework first. Not all properties can be rented out. Depending on the town, condo, or homeowner’s association, there could be rules regarding if, or how often, the home can be rented out, or if specific fees or taxes are required. It's also important to keep in mind that renting out your home is typically considered a "business activity", and thus is not covered by most homeowners insurance policies, so you may need to purchase a separate policy before you rent it out.
How will you rent it out? If you’re able to rent out the property, you’ll need to establish a plan for doing so. Will you hire a realtor or management company to market and rent the property for you, or will you be doing it yourself? Who will clean the home in between guests? You’ll need to determine a rate for your rental as well. A good place to start is finding out what neighboring properties are renting for. You should also establish when you’ll be renting it out, versus vacationing there. While you’re likely to want to visit your beach house in the summer, or your ski cottage in the winter, you need to keep in mind that others will too. If you need rental income in order to make your mortgage payments, you’ll most likely have to make your home available to renters for at least a portion of the peak season.
Protect your property while you’re away. Even if you’ll be renting out your vacation home, there’s still a good chance that it will be vacant for some periods of time. Keep in mind that empty properties are a prime target for burglars and thieves. An overgrown lawn or an overflowing mailbox could be a dead giveaway that the place is unoccupied, so it’s a good idea to consider a landscaper, and set up mail forwarding with the post office during the times you’re away. You may also want to invest in an alarm system or timers for your lights. And don’t forget that emergencies can happen. It’s a good idea to check on your home, or have someone check on it for you, on a fairly regular basis to ensure that any leaky pipes or broken windows are fixed before they become huge issues. Also, if a storm is headed for your vacation home, you should have a plan in place for necessary preparations or recovery.
Buying a vacation home is an exciting experience, but it pays to do your research and planning. If you’d like to talk with one of our mortgage experts about financing a second home, schedule a meeting with us today. We’re here to help you fulfill your vacation home dreams!
Chances are that you didn’t just jump into the decision to buy your primary residence, and buying a vacation home should take just as much careful thought and planning. By realistically evaluating your needs, wants, and means, you can set yourself up for a smooth home buying experience. Here are some considerations:
How much can you afford? When determining a price range for your vacation property search, be sure to factor in all of the costs involved with your purchase. Not only will you need to cover the mortgage each month, but you’ll be paying an extra set of utility bills, property taxes, and homeowners insurance as well. Depending on where you’re buying, your second home could also have additional expenses, such as HOA fees or flood insurance. You’ll also need to evaluate what it will cost to furnish the home. And don’t forget the price of maintaining it when you’re not there. Unless you plan to visit your vacation home on a regular basis, you’ll need to hire someone to routinely cut the grass, shovel snow or conduct other landscaping services. If you’ll be renting it out, you’ll also need someone to clean it before new guests arrive. And remember that your vacation home is really no different than your primary residence; appliances will break and need replacing, pipes will leak, and drains will back up. It’s important to leave some room in your budget for these types of unforeseen expenses.
Make sure you love the location. Don’t ever purchase a vacation home on a whim. While you’re enjoying a hard-earned week at the lake, it might seem like a great idea to buy your own lake house, but ask yourself if you really want to spend the majority of your future vacations there. Remember that this will be a place you return to over and over again. You’ll need to be sure you can see yourself and your family enjoying your time there for years to come. Otherwise, you’ll be looking at the stress and hassle of selling it- and if the market isn’t hot when you decide to sell, you could end up losing money in the process.
How far away is it? While you might dream of having a second home in Hawaii, or way out in the mountains of Colorado, it’s important to be realistic about how long it will take you, and how much trouble it will be, to travel there on a regular basis. If getting to your vacation home is a major challenge, chances are you won’t be able to enjoy it as often as you’d like. Remember that a vacation home is a major purchase - you want it to be worth the investment.
Can you rent it out? Many vacation homeowners offset the cost of their second home by renting it out while they’re not there. This allows them to collect rental income, and also prevents the house from being vacant for long periods of time. However, if you’re planning to rent out your vacation home, you should do your homework first. Not all properties can be rented out. Depending on the town, condo, or homeowner’s association, there could be rules regarding if, or how often, the home can be rented out, or if specific fees or taxes are required. It's also important to keep in mind that renting out your home is typically considered a "business activity", and thus is not covered by most homeowners insurance policies, so you may need to purchase a separate policy before you rent it out.
How will you rent it out? If you’re able to rent out the property, you’ll need to establish a plan for doing so. Will you hire a realtor or management company to market and rent the property for you, or will you be doing it yourself? Who will clean the home in between guests? You’ll need to determine a rate for your rental as well. A good place to start is finding out what neighboring properties are renting for. You should also establish when you’ll be renting it out, versus vacationing there. While you’re likely to want to visit your beach house in the summer, or your ski cottage in the winter, you need to keep in mind that others will too. If you need rental income in order to make your mortgage payments, you’ll most likely have to make your home available to renters for at least a portion of the peak season.
Protect your property while you’re away. Even if you’ll be renting out your vacation home, there’s still a good chance that it will be vacant for some periods of time. Keep in mind that empty properties are a prime target for burglars and thieves. An overgrown lawn or an overflowing mailbox could be a dead giveaway that the place is unoccupied, so it’s a good idea to consider a landscaper, and set up mail forwarding with the post office during the times you’re away. You may also want to invest in an alarm system or timers for your lights. And don’t forget that emergencies can happen. It’s a good idea to check on your home, or have someone check on it for you, on a fairly regular basis to ensure that any leaky pipes or broken windows are fixed before they become huge issues. Also, if a storm is headed for your vacation home, you should have a plan in place for necessary preparations or recovery.
Buying a vacation home is an exciting experience, but it pays to do your research and planning. If you’d like to talk with one of our mortgage experts about financing a second home, schedule a meeting with us today. We’re here to help you fulfill your vacation home dreams!