It’s that time of year again. Dreary skies and cool temps coupled with spring break planning has you thinking of what it’s actually like to own a home in your favorite vacation spot. In 2015, vacation homebuyers accounted for 16 percent of all homebuyers, which is historically high, according to the National Association of REALTORS® 2016 Investment & Vacation Home Buyers Survey. If a vacation home has been on your mind, here’s what you need to know about financing and choosing a good second home investment.
Assess Your Goals
According to the survey, the biggest motivation for buyers to purchase a vacation home in 2015 was personal use (37%), followed by future retirement (16%), low real estate prices (12%), potential for price appreciation (12%) and low mortgage rates (12%).
Would you use the home primarily for personal use or rental income? If you plan to use for both, will rental demand interfere with the timeframe you want to be in the home. Typically, getaway properties are only rented 17 weeks out of the year, so if maximizing rental income is your top goal, you may have to give up peak-season vacations for yourself.
Get a Local’s Perspective
If you’re serious about buying a vacation home (whether for personal or investment use), you’ll need to do some research while visiting. Ask locals questions referring to:
- Their likes and dislikes of the area
- How the area has changed
- What the area is like in the off-season
Envision a Renter’s Point of View
If you’ll be renting out the property, you’ll need to consider the amenities renters expect. What would you pay for a night in a certain location and what amenities would you expect to have at hand? For instance, if you’re scouting a coastal property, a renter is going to pay more for a property with beach and boardwalk access, as well as an ocean view.
Calculate Your Miscellaneous Expenses
Just like when you purchase a primary residence, your second/vacation home comes with costs that aren’t fixed. Remember that on top of your principal, interest, taxes and insurance on your second home, you’ll also have to budget for water, gas, electric, trash removal, maintenance, landscaping, etc.
You’ll also need to account for a property manager if you don’t plan on visiting often and a marketing strategy to fill the home if you plan to use it as a rental-income generator.
Look for Comparable Properties & the Local School District
Review other home sales nearby your potential purchase property to determine resale value trends. Also, pay attention to the school district the home is located within. Even if you don’t plan on sending your own kids to school there, a good school district greatly affects your property’s value.
Work with Someone Local
A real estate agent with experience and knowledge in your desired area can make all the difference in a second home purchase, especially if you’re buying a vacation-destination rental property.
Another plus would be to find an agent with a Resort and Second-Home Property Specialist (RSPS) Certification through the National Association of Realtors. These agents specialize in buying, selling and management of properties for investment, retirement or second homes in resort or vacation destinations.
For more information and advice on investing in a vacation or secondary home, download our free Vacation & Second Homes Guide.