Taking a break from the day-to-day stresses in a location you adore might sound like a dream come true. If that vision has led you to consider purchasing a vacation home, you’re probably eager to begin house hunting. After all, you can furnish this retreat as you wish, filling it with the comforts of home, and avoid the hassle of searching for a new place year after year. But as with purchasing your primary home, there are numerous considerations to take into account before making an offer.
Without giving the following factors thorough evaluation, your dream vacation property may become more of a headache.
Choose the location carefully
In order to ensure that you’ll get the most use of this property, it should be easily accessible. Vacation homeowners find that staying within 50 - 180 miles of their primary residence is the right distance as it’s reachable in several hours’ drive.
If you’re planning to rent out the home to generate revenue, you may want to pick a spot that’s attractive to vacationers during multiple seasons rather than just two-to-three months of the year. For this reason, it’s wise to visit your desired location during different seasons to get a feel for how busy or quiet it might be.
If you’re thinking of this home as an investment, do some research to determine projected growth rates for the community. You’ll want to make sure the local economy is strong and on an upward trajectory.
As many desired vacation properties are near oceans, lakes or rivers, or at mountain recreation areas, consider the weather and chances of natural disasters impacting your home. If you’re looking in a hurricane-prone area, buying blocks away from the ocean could be a smarter purchase than oceanfront property.
Rent before buying
A bit like taking a car for a test drive, you’ll want to rent in the area before you purchase. If the specific property you have in mind is available as a rental or Airbnb, even better. You’ll get to “kick the tires” before locking yourself into a deal. This way you can figure out what you like and what needs to be improved.
Experts recommend spending at least a week or two to make sure that the area doesn’t lose its appeal after just a few days. This will also give you an opportunity to potentially observe the flow of visitors as they come and go and see how easy it is to maneuver through town during peak seasons. For example, are stores crowded, are you favorite restaurants booked?
You can also use this time to speak with local residents who can share the good and the bad of owning in the community. Often, gathering this information from those with roots in the area can prove priceless.
Crunch the numbers
Many people purchase vacation homes as an investment, believing their property will increase in value and offer a break at tax time. But, as of 2018, the total of all state and local taxes deducted, including property taxes, was limited to $10,000 per tax return.
That’s not the only place where figures can get a bit complicated. If you’re planning to rent out the home to help cover the mortgage, it’s wise to brush up on the laws that dictate how much time you can spend there as different tax rules apply depending on the breakdown between personal and rental use. Talk with a local vacation rental agency to find out how much time you can realistically expect your property to be occupied. Additionally, consult your tax preparer for specifics as they apply to your unique situation.
It’s smart to stay below budget when you consider that you’ll also need to factor in taxes and insurance. Even if the home appears to be in tip-top shape at the outset, you will need to make repairs over time, so don’t forget to account for those as well. Experts advise that repairs will cost about 1.5% of the value of the house annually. So, for example, a $200,000 place budget for at least $3,000 a year in repairs.
It goes without saying that considering buying a vacation home falls into the “nice-problem-to-have” category. But excitement aside, figuring out what best suits your lifestyle and budget before you house hunt will make your vacation home even more restful.