Reasons Why a Vacation Home Might Be a Bad Investment

When you have the perfect vacation in great location, it is tempting to dream about owning a vacation home. However, an article in Realtor.com points out that a vacation home may not be such a great investment, as, after all, nobody actually needs a second home.

Apparently, part of the problem is that many people do not realize the level of commitment a second home requires, and that commitment includes money and time. The article highlights several important things to consider if you are thinking about buying a vacation home.

The first thing is that vacation homes often need a larger down payment for buyers who can’t make a cash purchase. Typically, a 20% to 30% down payment is needed but this is dependent on the location and condition of the property and its market value, as well as your credit history. Another thing to think about is the need for special insurance, particularly for coastal homes. It may be necessary to purchase hurricane insurance or flood insurance.

When a home is more than an hour’s drive away from your primary property and especially if you’ve chosen to rent it out to bring in some extra cash, it’s necessary to have someone close by who can oversee your property such as a property manager. Even if you don’t intend to rent it out, you still need to have someone who can pop in regularly just to make sure everything is okay. If you are thinking about renting out your vacation home, it’s important to consider utility costs as people renting vacation homes don’t tend to take a very parsimonious approach towards heating, cooling and water usage.

Then there is the problem of routine maintenance which can take time and money. While homeowners who are keen on DIY might be prepared to do much of the work themselves, it does mean they could end up spending much of their vacation doing maintenance work. Having a vacation home can be a big responsibility that for some will be their little piece of paradise but for others could become a millstone.