The pandemic of 2020 caused many people to change how and where they work. The flexibility to work remotely inspired many people to branch out and consider being a vacation home.
Throughout the past year, vacation home sales began to rapidly rise. Not only are vacation homes a great escape for you, your family, and your friends but they can be a great investment.
Before you buy, you must have a vacation plan.
Shopping for a vacation home is a fun and exciting process. That said, many people have found themselves getting caught up in the excitement and making impulsive purchases.
Instead of buying the vacation home of their dreams, they end up buying an overpriced property in need of costly improvements. Others find they rarely use their vacation home.
Fortunately, you can easily avoid these mistakes. Follow these 7 key tips on creating a vacation plan before buying your first vacation home.
1. Location Is Everything
Where do you want your vacation home? Think about places you enjoy or want to go to more than once.
Then follow that question with your purpose behind buying a vacation home. Think about the activities you enjoy doing while on vacation or away from your primary home. If the purpose is to rent out your vacation home, consider highly desired vacation areas.
These aspects should shape the location you choose.
The second part of the location you need to consider is the neighborhood. Is it a safe respectable neighborhood? Are you near any amenities, parks, or entertainment?
This will ensure you and your family are safe when you’re visiting. When you’re not visiting, you’ll be able to rest easy knowing no one will disturb your home when you’re gone.
2. Go Under Budget
A common trap vacation home buyers fall for is buying over budget. This will only cause your vacation home to be a place of stress rather than of escape and relaxation.
Calculate a monthly budget for what you can afford in a vacation home. Once you have that number, stick to that number of go below it.
There are several costs associated with a vacation home beyond the mortgage. These costs include:
- Taxes such as property tax and conveyance tax if you’re buying out-of-state
- Utilities including water, electricity, and internet
- Insurance such as homeowners insurance and additional policies for renting
- HOA (Homeowners Association) fees
- Decor, furnishings, and home improvement
- Possible property management services
If possible, look for vacation homes under your budget. This will allow you to make any improvements to the home. There are plenty of repossessed villas and homes that may fit well within your budget.
If you find you use the property a lot, you can always sell and upgrade to a better vacation home.
3. Rent a Home First
You have a couple of great vacation areas in mind but how do you know you’ll really like them? You may think you’ll love the area but reading about it is completely different from experiencing it.
Before you buy a vacation home, rent a house or an apartment in the area for at least two weeks. This will give you time to explore and see what the area has to offer. You may find you like one area of the city or state more than the other.
If you find you don’t like the location, nothing is tying you to it.
4. How Often Will You Use It?
You need to be realistic when considering buying a vacation home. Be honest with yourself, how often will you use it.
If you’re looking for a vacation home to use once, maybe twice a year for a few days at a time, is a vacation home really worth it? It may be a financially better option to rent a home from a local a few times a year.
Conversely, if you’re planning to rent the home out most of the year, it can be a worthwhile investment.
5. Associated Taxes
Every piece of private property has associated taxes. A vacation home is no exception.
The caveat with a vacation home is the taxes will be different. Depending on the state, or country, you may not be able to claim homestead taxes or other tax breaks.
As you browse available vacation properties check out the tax implications of the properties in that area. Some places will have greater property taxes compared to others.
Those planning to rent out their vacation homes will also have to pay income taxes on the rental income they make. If you’re unsure how to maneuver through the tax-side of owning a vacation home, talk with a realtor to help you through the process.
6. Be Smart About Rental Income
You found the perfect vacation home in a great area. You’re positive the demand to rent this home will be high.
This is a common misconception many potential vacation homeowners fall for. If you talk with a nearby vacation rental company or individual, you’ll learn every place has a lull in demand. Even during peak season, you can’t expect someone will rent your vacation property every week or every day.
As you budget for your vacation home, make a conservative guess on rental income. Aiming low will help you stay within budget. Should you have great luck renting your property, you can enjoy a greater profit and always upgrade if needed.
7. Make a Vacation Plan
Getting caught up in the moment is easy when dreaming of buying a vacation home.
It’s tempting to jump all in when a friend or family member mentions investing in a vacation home. You may get carried away with dreams of incredible profits and creating unforgettable memories. It’s not until reality settles in that these dreams can quickly become nightmares.
Buying a vacation home can be a great investment but only if you make a great vacation plan. Take your time and do your research to ensure you find the right place for you and your family.
Find Your Perfect Vacation Home Today
Now that you have the freedom to work from anywhere, investing in a vacation home sounds like a reality. Making a vacation plan is the first step in every vacation buying process. You’ll be able to weigh the pros and cons of buying a second home and find out if it’s the right option for you!
Are you still looking for your ideal vacation home? Let us know! We’re here to make your vacation home dream a reality.
