There are a variety of reasons to consider purchasing a vacation home. Maybe your family has fallen in love with a destination and visits it often, or you need a central location for branches of your family to gather. Perhaps you've recently sold other real estate and are looking for a 1031 exchange for the tax benefits.
Whatever the reason for buying a vacation home, there are some important pros and cons to consider.
Your vacation home is more than a place to get away from daily life — there are a host of benefits.
Some of the primary benefits of buying a vacation home include:
Additionally, you may be eligible for certain tax and mortgage breaks if you choose to not use your vacation home as a rental. And because it’s your home, you can fill it with everything you need to vacation comfortably — no more lugging gear on a plane or in the car on the way to a vacation!
Of course, there are some drawbacks to consider when it comes to buying a vacation home.
Buying another home means another mortgage, property taxes, and maintenance — often in another state.
And when it comes to getting a mortgage, many lenders are reluctant to finance vacation homes, especially in a tight or competitive housing market. Fees are generally higher, too.
You may also find it difficult to pinpoint a suitable vacation home in your desired location. The most popular vacation locales — beaches and ski towns — are also the most expensive. Make sure that you are not taking on more expenses than you can handle, as selling a vacation home too quickly can often result in a loss. (However, you mitigate losses with the help of a flat-fee real estate company.)
Take some time to research the tax and financial responsibilities of a vacation home before you start your search.
Questions to consider include:
Answering these questions will help you decide if owning a vacation home is right for you.
If you are looking for a relatively maintenance-free vacation home, consider a condo instead of a standalone house. However, if you want less of your money to go towards condo fees and more of it toward the purchase of your home, a single-family home might be best for you.
Consider also how much time you want to spend on upkeep. Although you might prefer the look of a lush, green lawn and elaborate landscaping, do you really want to do yard work when you're on vacation? Or pay someone else to do it?
Choosing the best property type for you means evaluating how you will use it, what works best for your family, and how much time you want to spend on maintenance and upkeep.
Your local financial institutions will be the best source of information in terms of which type of mortgage is best for you. Take the time to prequalify for a mortgage. This will help focus your search on properties that won't break your budget.
Getting prequalified is also important if you are using your vacation home primarily as an investment property. There are different rules and regulations that might apply in your area.
Look for a real estate agent that has experience selling vacation homes specifically, as they can help you navigate the process more easily.
Some questions to ask your realtor include:
If you choose not to rent your vacation home out, a local property manager can help you with any maintenance issues that arise when you're not there. They can also arrange to have your home opened and cleaned prior to your arrival to make it easier to dive right into your vacation.
Not quite ready to buy a home where your work and permanent residence is? Look into purchasing a vacation home first. Not only does this offer you all of the benefits of buying a vacation home, but it also allows you to build up equity and take tax breaks available to first homes. And since this is the first property in your real estate portfolio, it may be easier (and more affordable) to acquire a mortgage.
Whether you are buying a second property as an investment, a rental property, or to simply spend more time with your family, a vacation home can be a solid option.