4 Considerations When Buying a Vacation Home

In the past few years, we’ve seen the housing market change dramatically across the country. With historically low interest rates, more work-from-home options and desire for more space, the demand for not just primary, but secondary residences has sky rocketed. More people than ever are buying vacation homes, with the intention of holidaying themselves, as well as renting them out on platforms like Airbnb and VRBO.

Vacation homes have become a more viable option for travel (especially in the restricted pandemic years) with more freedom than hotels can offer. And in today’s financial climate, Americans are always looking for ways to earn additional income. Airbnb and sites like it offer an easy way for the average buyer to capitalize on investment properties. If you’re looking to boost your income and quality of life, here are 4 considerations when buying a vacation home. 

Renting 

How do you want your second home to work for you? You may only wish to keep it for personal use, but a smart vacation home purchase is one that also incorporates rental potential into the equation. Becoming a host on Airbnb and VRBO (the two most popular rental platforms) is a great way to make money. Short-term rentals are the future of the industry, and hosting can be a relatively hands-off stream of income. Once you get to learn the laws and regulations for your location, you’ll find that the platforms are quite user friendly. You have the liberty to define your own rental terms and conditions and easily get in touch with guests online. 

Second homes and investment properties have very different lending and tax implications, so it’s essential to consider how you intend to use the property. If managed correctly, many of your costs can be offset by rental income. From a long-term-investment standpoint, rental income may allow you to build equity and eventually pay off the property. Analyze nearby homes, talk to local agents, and look online to see what’s renting and for what prices.

Location

Finding a good location is one of the main considerations when buying a vacation home. Think of location in terms of real estate market value, as well as determining which amenities are important to you. Are you looking for access to nightlife, shopping, beach, snow, nature or entertainment? Think about what areas can provide you or your renters with the best experience and look for properties there. It’s also wise not to purchase until you’ve visited the area several times. Be sure that you adore that beach town or ski village before you commit to buying there, as you or your renters will be spending a lot of time there. Make use of resources like heat map analysis tools when buying an investment property, too. Gain insight into how potential visitors think and what the most popular locations in your city may be. 

Under the umbrella of location evaluation falls safety. Research the local crime rates before you buy – especially if you’ll be leaving the home unoccupied for long periods of time. A break-in at your vacation home can be particularly frustrating when you’re not around to do damage control. Take into account the cost of a security system in your budget if need be. Finally, consider the accessibility of your new residence. How easy and affordable will it be for you to travel there? This is one of the key considerations when buying a vacation home. While it may sound romantic to have a cabin high in the hills, if it takes a flight, rental car and ten hour drive to get there, it may not get much use.

Budget 

Before you begin your search for a vacation home, you need to decide on a budget. Is that dream home with a pool and stunning views really in your price range? Become familiar with the total price of owning your second home, including property taxes, insurance, and other additional costs. Even when it’s unoccupied, you’re responsible for water, gas, electrical, landscaping, and other maintenance bills. You may face hidden charges like inspection, insurance, property tax, HOA fees, etc. Throw in unexpected expenses like new furniture, appliances and cleaning fees, and you may be punching above your weight. (On that note, while buying a property that’s newly renovated with new appliances may cost you extra upfront, it will save you money in the long run). If necessary, you can consider mortgage payments to avoid paying the entire cost at once.

Maintenance

Whether you plan to rent the vacation property or use it yourself, you’ll need to handle house maintenance. If you may only be there for a small fraction of time, make arrangements for keeping the property maintained throughout the year. This may be a costly venture and will need to be considered in the overall cost of the home. You can decide whether you want to do the maintenance yourself or hire someone to take care of the place when you’re not using it. If you decide to pay a third party to manage home maintenance, be sure you have the financial means to cover the costs. With certain types of vacation homes come more responsibilities. Homes on an acreage will need upkeep, such as pulling weeds, mowing the lawn and cleaning out gutters. If you’re someone who doesn’t want to do the extra labor, consider a place where maintenance is minimal or included in HOA fees.

Property investors can earn a lot of money – but only if they make smart moves. If you’re contemplating a second home, choose carefully. By keeping as many factors in mind as possible, you can maximize the earning potential of your rental, or make the most of your new vacation home. Let us know if you have any personal experience, questions or comments in the chat below!