The thought of buying a vacation home is an appealing idea to many people. After all, wouldn't it be great to own a place in the mountains or by the ocean to retreat to on the weekends or on an annual holiday? Owning a vacation property increases the ability to get away from it all on a moment's notice if the desire and time arises. Another appeal connected with buying a vacation house is to use it as a way to earn a secondary income during the times the owner is not spending time at the getaway.
Owning a special place to unwind, relax and enjoy the surroundings is an appeal for many people. But is the investment worth it?
This dream to purchase a vacation home can be an alluring one and, during a time when prices on houses have dipped, for many, this often further intensifies the temptation to buy a second home. In many ways, it is a good time to buy during the time when the real estate market is taking a dip because sometimes vacation home prices may actually fall into an affordable range.
That being said, there are many things to consider before buying that dream vacation house as there are many pros and cons connected with this type of investment. While the home's purchase price may be good, it is important to consider all the other expenses connected with owning a second house.
Here are a few of the top things which should carefully be weighed before making the plunge with a purchase:
1. Is the Initial Investment Manageable?
Finances are a primary concern. Is the home affordable in an existing budget? If not, then it is probably not a wise idea to deplete savings or tap out income in order to pay for the new home. Putting a high level of pressure in order to have that dream home may not be worth the risk, especially in light of the fact unforeseen expenses can and often do occur in any home.
Unless the money is already in the budget and can handle the extra expense, a buyer may want to consider thinking twice before signing the dotted line and buying more real estate. However, if enough money is saved for the down payment and this does not take away from the primary home, the primary house is already paid off, or a second mortgage fits into the budget, purchasing a vacation home can be a terrific investment both financially and emotionally.
2. What About the Extra Expenses?
With two homes come double the expenses. It is important to remember that adding a second home to the list of assets means additional liability - double the utilities, taxes, insurance and upkeep, for starters. Then there is maintenance, both ongoing and preventative to consider. Not to mention furnishing the home.
Owners of two houses have to remember double the fun or investment, but also double the work.
3. Can Maintenance Be Handled on Both Homes?
With owning a secondary house, it comes with additional maintenance for heating, cooling, plumbing, the homes structure, interior needs, landscaping and more. If the home is an older one or needs upgrading, this can be a considerable expense. It is not common for vacation homes to need a lot of work once purchased.
The cost and time invested in maintenance will increase tenfold if the home is rented out as a source of secondary income. Consider, higher levels of traffic, more use, and wear and tear throughout the home when numerous people are using it. Maintenance is a primary consideration that should be looked at prior to making a purchase. Will this be too expensive or too much work? Is it worth the effort?
Vacation houses need a lot of TLC, especially when facing weather elements, many renters using the home and regular upkeep.
4. What Are Personal Preferences?
Many people like to return to the same vacation destination year after year with little variation. For those who prefer the familiarity of a comfortable location, it may make sense to buy a home rather than rent year after year. However, vacationers who are more inclined to see a variety of locations, buying a home in a place which is not one frequented does not make good sense financially. Even if the vacation home is a true bargain, if it is not a place which will be visited frequently enough, then the investment may not be a wise one or be worth the expense.
5. Is Additional Income Desired?
Purchasing a rental home often can result in a creation of the best of both worlds. An instant location to take off to when desired and, when not being used, the home can also be a source of income when rented to other vacationers. For many this is a winning combination, however, tax obligations should also be investigated. If a home is used for both personal and business, many tax breaks may not apply.
6. What Rental Obligations Will There Be?
If the home will serve as a rental for the time it is not being utilized, then all of the obligations that come with being an owner to customers should be considered. This may mean hiring a property manager, caretaker, contractors and other personnel to keep on hand in the event emergency repairs need to be made.
There is also a level of risk to consider as not all renters will be considerate to the upkeep and care of the home. It is a given cleaning personnel will need to be hired after every rental contract ends to ensure the place is in optimal condition for the next customer.
It's important to evaluate just how you feel about handing over the keys to your home to someone else on a regular basis.
There are many pros and cons associated with purchasing a rental home, and the investment could be a good one depending upon personal desires and financial feasibility. While imagining the possibilities is fun, it is also important to factor in the realities of owning a vacation home prior to making a decision to buy.