Not only is a vacation home an investment, it’s also a gift you give yourself as a reward for your hard work. It’s a place you can visit consistently without making a reservation—a place you can share and enjoy with family and friends.
If you’re thinking about buying a vacation home, here are four basic considerations before you make your move.
1. The type of property
Your preferences guide whether you shop for a single-family home, a townhouse, or a condo. But as you evaluate the pros and cons of each option, there are economic considerations connected with your choice as well. For example, single-family homes may incur higher maintenance costs. Condos may be assessed association fees—carefully check for any major bills facing the homeowner’s association before you buy. Hidden or hard-to-project costs can really throw off the math, so it’s worthwhile to do your homework up front. Finally, it’s important to search for properties that can hold and build value.
2. The size of your vacation home
The decision about how large or small your vacation home should be also depends on your preferences. A smaller property might be a perfect fit for your needs right now. But if your family grows and a change in careers offers greater vacation flexibility or possibly early retirement, you may find you need a larger place. Buyers often want to consider a slightly bigger home than they think they need right now, or at least make sure the property offers expansion potential.
3. Location flexibility
Many potential vacation homeowners may find the economics are more compelling in a location that ranks second or third among their favorite places. And depending on how long you plan to own the property, location plays a key role if you want to consider making this a long-term investment as part of your retirement plan and a place to spend your golden years.
4. Renting out your vacation home
Most likely you won’t be using your vacation home for many weeks throughout the year. Depending on your work and personal schedules, you may be able to spend only a few weeks of planned vacation time at the property. If so, you may want to explore the option of using your vacation home for rental income. The local market’s strengths and weaknesses will factor into your vacation equation.
Do your homework to determine how much demand there is for rental properties in your desired location. Also check out the prevailing rental rates. If you plan to cover the purchase costs of your property through rental income, you’ll want to determine the potential income of the property less expenses such as utilities and property management costs. Work with a banking specialist to determine whether the rental income justifies the price being asked for the property.