Are you interested in purchasing a vacation home? Are you wondering what you should know before you take the plunge?
Whether it’s across the country or across the road, buying a second home can be appealing for a variety of reasons. You may be looking to make a sound investment, establish rental income for retirement, or own your dream vacation home in a destination you love to visit.
That said, it’s still wise to weigh the pros and cons of all your options, before you purchase a second home.
Here are some things you’ll want to consider.
1. Know Your Budget
If you’ve worked hard and saved, you may be looking forward to rewarding yourself with that gorgeous condo near the water or cozy mountain cottage you’ve always dreamed of. When reviewing your finances, just keep in mind that the purchase price isn’t the only cost that second-home owners face.
No doubt you will pay taxes and homeowner’s insurance on your new home. There will also be utilities such as heat, hot water, and electricity to consider, as well as inevitable maintenance to keep things in good, working condition.
If your home is a condo or located in a gated community, you might also be responsible for HOA fees. This may include services like lawn mowing or the use of a community pool. If it doesn’t, remember that you may need to pay someone to maintain the property if you don’t plan on living there full time. In this regard, an HOA can be a big plus for a second home, since you won’t need to manage as much upkeep while you’re away from the property.
You’ll also want to consider what it will cost to furnish your home, as well as the ongoing costs of maintenance. Make sure you leave yourself a little cushion for emergencies.
Add up your estimated costs and decide what you can truly afford. Consider the rent you’ll need to charge in order to keep up with your monthly expenses. Is this enough to cover the costs, and will you be able to generate a little income? Depending on the leasing rates in your target second-home area, you may come out with considerable monthly profit, or you may be cutting things uncomfortably close.
Buying a second home or vacation home can be a wonderful opportunity, and carefully planning your budget will ensure that you can enjoy the experience rather than regret it down the line.
2. Location, Location, Location
As with all real estate, it’s important to consider where your potential second home is located. If you intend it to be a vacation home, will you be happy visiting the same place again and again?
Many of us have somewhere away from home that we truly love, but many others prefer not to be locked down to one location. If your options are a second home or occasional trips to far-flung lands, consider which is best for you. (If you have the resources for both, even better!)
Location is perhaps even more important with an income property. As mentioned above, it’s critical that you research the going rates for rent in the neighborhood to make sure your costs are covered. Also, you will have some responsibilities as a landlord.
If your income property is near your primary residence, it’s less hassle to manage the property and tenants yourself. However, if the property is further away, or if you simply don’t want to deal with the extra work of being a landlord, you may want to hire a property management company.
3. Know About Appreciation
You may be purchasing a house to renovate and flip, or you may want to use it as an investment property over a period of years. In this case, it’s important that your home increases in value over time. Do a little research and make sure that this is a fairly safe bet before you purchase.
First, the home should be located in an up-and-coming neighborhood. Are there good schools and a growing population? Are there enough amenities to attract young families or retirees? An income property in a dwindling rural area is probably not going to appreciate much in value, but in a popular city or destination it has great potential.
Do some research on the projected growth for a particular area before you make an offer. Interview real estate agents in the area, and find a good fit with an experienced agent whose guidance you trust. As an expert in the area, they will be your greatest resource.
4. Spend Some Time
Maybe it goes without saying, but before you drop hundreds of thousands of dollars on a vacation home, it’s important to know you really like the place! To get a sense of living in an area, it’s a good idea to rent a home, or at least a hotel, for a time before making the big investment.
If you’re planning on eventually making your vacation home your full-time residence, make sure you take a trip during different seasons. Are you ready for southern heat in the summer? How about chilly nights in the mountains? Does the area have sufficient local business and amenities to meet your needs while you’re on vacation — say, restaurants, grocery stores, conveniences like gas stations, or medical facilities?
There’s no one perfect place for everyone; it’s just a matter of finding the right place for you. Once you know what you can realistically expect from your vacation home, and you are happy with it, then go for it!
Your Dream Vacation Home
Real estate transactions are among the largest purchases we make, so buying the perfect second home will take a bit of research. However, once you’ve found the right property in a location you love, you’re on your way toward a very rewarding lifestyle! Your family and your stress levels will be thanking you for years to come.
Don’t stop getting smart about vacation and rental homes now. For guidance on buying or selling a home in the Orange County area, please don’t hesitate to reach out. Contact the Stavros Group today!