Things to Consider Before Buying a Vacation Home
As spring gives way to summer, many people become infatuated with the idea of buying a vacation home near the beach, on the lake, or in a state or city with a much cooler climate to escape the unrelenting July and August heat. There are a lot of benefits to owning a vacation home from having a place to escape the stresses and realities of everyday life for a long weekend, to renting it out during peak seasons for some extra cash. But with this long list of benefits, there are also a few things you should consider and know before the point of purchase to ensure you are happy with your decision for years to come.
If you are currently thinking about purchasing a vacation home, you’re not alone. There were an estimated 1.13 million vacation homes sold in the United States in 2014 with vacation home sales making up over a fifth of all residential home purchases. And while it certainly is a good time to be in the market for a second home thanks to low-interest rates and a solid economy, the key to making the best decision isn’t always a matter of money but experience and knowledge. Whether you’re an older adult on the verge of retiring and settling somewhere with a warmer climate or looking to invest in a long-term vacation home near the beach, it’s important to go into the buying process with realistic expectations and with the help of a professional.
What are you really buying the home for?
Real estate experts around the country all warn potential buyers that before buying a vacation home you should think about what it’s going to primarily be used for and make sure you’re buying for the right reason. Whether for pleasure, a source of income or long-term investment, be realistic about your expectations and buy for the right reason. A 2017 survey from The Wall Street Journal says 42 percent of vacation home purchases are for personal and family use and experts seem to agree that this is the best reason to buy a second home. That’s because predicting a consistent and robust source of income from renting the home isn’t a guarantee. Rental income should be looked at as a secondary source of income and one of the many benefits of buying the home, but not the number one reason.
Additionally, it can be dangerous to purchase a home thinking rental income will cover the mortgage and expenses. Housing markets fluctuate and relying on renting it out to make the purchase worthwhile can lead to disappointment in the future. The same goes for buying the home strictly as an investment or to turn a profit in the future. Pick a home in a location you enjoy visiting and treat any additional benefits such as long or short-term rental income as a bonus, not the primary reason for purchasing.
Like any big purchase, it can be easy to get impatient and be so blinded by the desire to own a vacation home that you end up rushing into the decision without considering every detail. One of these details is location. Even if you aren’t using the home primarily for rental income or as an investment, the home’s location is still important. If the home is truly a second home and not a vacation home yet, an area that’s good for business will give you more options for renting it out and potentially making some extra money to cover costs and a portion of the mortgage.
Fifty-seven percent of vacation homes are on the beachfront or lakefront properties, but there can be major differences in the home’s value based on where they’re located near the body of water. Pay attention to construction in the are. If there is a lot, the location may be gaining popularity and will be a desirable place for years to come. Other location-based factors to consider are the view, distance to the nearest town, restaurants, and other amenities, as well as distance from your primary home. The average vacation home is 200 miles from the primary home, meaning you may have to spend money on a property manager and cleaning service or spend your free time driving back and forth to take care of the home, do chores, and make repairs. By considering these additional costs—both in dollars and in time—you can make sure you don’t regret your purchase years down the road.
Know the rules and be aware of hidden costs
Before buying a vacation home, it’s essential to do your research on the neighborhood and any restrictions or rules for renting out your property. Homebuyers who have never purchased or invested in a vacation home may be surprised or blindsided by local government or homeowners association rules putting restrictions on renting out the property. In some cases, there may be limits on when the property can be rented, for how long, and using pre-approved or specific programs and rental companies to do business.
Additionally, you need to be aware of all costs, not just the mortgage and utilities, to make sure you can afford the home. You may also have to pay HOA or condo fees as well as property taxes, insurance costs, and the thousands of dollars in furnishing the home for yourselves and your potential renters. Remember, there’s no guarantee that the demand for your area will always be there and the amount you can earn in rent or appreciation may fluctuate from year to year.
The Austin area is a great destination for primary homes as well as vacation homes. From the appeal of a thriving and lively city to the proximity to the scenic hill country, Austin is an ideal place to invest in a vacation home when you want to escape the realities of life. At Domain Realty, our team of Austin real estate experts is dedicated to guiding you through the home buying process to help you secure the vacation home of your dreams. To speak with an Austin real estate expert, contact us today by calling (512) 872-4211.