You found an area you love and you’re thinking of buying a vacation home there. Having a second home can make vacationing easier, but it’s not always the right choice. Before you buy a vacation home, do your homework and make an informed decision.
Here are our 7 tips for buying a vacation home:
Have a Clear “Why”
It’s easy to get caught up in the charm of a new area when you’re on vacation, but it’s different to love a place enough to buy a second home there. Make a list of what you love about the area and create a calendar of dates you plan to visit. Does the list of loves and your availability to travel justify the expense of a second home?
Give it a Trial Run
Before you make the decision to buy a second home, be extra sure you like the area. Take a few trips to your desired location and rent homes in different neighborhoods. This will help you get a feel for what you enjoy most about the area and identify target neighborhoods.
Talk to Your CPA
Taxes on a second home can be complicated. Before you make the commitment to a vacation home, sit down with your CPA to learn more about the tax implications. For example, if you plan to rent it out when you are not using it, you may have to pay taxes on the rental fees collected.
Make a Plan for the Off-Season
When you’re away from your vacation home for long periods of time, will you leave it sitting empty or are you hoping to cover the costs by renting the home? If you are planning on renting the property, check municipal codes and HOA bylaws to ensure short-term tenants are allowed. Either way, you also need to make a plan for keeping the home maintained while you are away.
Take Your Time
Don’t rush into selecting a vacation home. Take your time finding the right home in the right area. Meet up with a local real estate agent who knows the area and take your time looking at multiple homes. If you don’t find the right one during your trip, come back another time and try again.
Spend Less than Your Budget
It’s easy to max out your budget to get the best vacation home possible, but be careful. Over time, high monthly costs can cause stress and resentment toward your purchase. Don’t sacrifice too much, but be sure to make a reasonable purchase within your budget.
Calculate Additional Costs
Maintenance costs on a vacation home can add up, not to mention taxes, insurance and travel costs to and from. Depending on the location, you may have higher than expected maintenance costs. For instance, a beach home may need to be painted every two or three years and a mountain house may need frequent deck and roof repairs.
Don’t let these tips discourage you. A vacation home can be part of a complete financial plan. If you are envisioning a vacation home as part of your retirement plan, reach out to your financial planner to talk about incorporating it into your plan.
If you are still looking for a trustworthy planner, contact Sharkey, Howes & Javer today. Our initial consultations are complimentary and we’d love to hear about your retirement goals.