Do you dream of escaping to your own beach bungalow on the weekends? Do you want to spend your holidays in a home in the mountains or a quaint little town you discovered on a road trip? If you’re longing for a home-away-from-home, then purchasing a vacation property might be a good choice!
But before you make such a big decision, there are several factors you need to consider, from location to affordability to maintenance. We’ve got a few tips to get you started and help you decide if purchasing a vacation home is right for you.
Location, Location, Location
When you’re looking for a vacation or second home, where you buy is about as crucial as what you buy. If you’re in the market for a home that needs little work, you may want to consider smaller towns, suburbs, and more out-of-the-way locations for your vacation home. But if you’re handy and can do a little repair and remodel work yourself, you’ll find that there are desirable areas around the country where you could pick up a foreclosure or real estate owned (REO) property at a good bargain price. Cities such as Chicago, Miami, and Las Vegas still have a high number of bank-owned properties in good shape, and these are historically great vacation spots not only for you, but also for renting out to other travelers when you’re back at your primary residence. Look to a national real estate company to find an agent who can help you review properties in another state.
A vacation home doesn’t have to be a plane ride away. If you want to be able to pack up the family and drive a couple of hours to your vacation destination, saving some travel money and ensuring you’ll use the property more than once a year, then just take a look around your home state. About one-third of vacationers prefer destinations within 250 miles from home, and long weekends have overtaken longer trips in popularity. If you’re in the city, consider a country cottage; leave your beach bungalow for a mountain retreat. If you’ve always wanted a change of scenery available when the mood strikes you, now is your chance to make that desire a reality.
It’s important to remember that a vacation home is, after all, a home. You’ll likely have a mortgage and will have to pay the same kinds of costs you do in your primary residence. You'll need to sit down with your lender and review your finances to ensure you can qualify for a loan to purchase another property. Second-home loans can have different requirements than a first mortgage, and you’ll need to be sure you can pay two mortgages comfortably. You’ll also have taxes, interest, and homeowners insurance to budget for.
Costs for maintenance on the home will depend on whether you close up the property when you’re not there or whether you rent it out part-time. A rental property also requires a special type of insurance that differs from — and is generally more expensive than — regular homeowners insurance. Will you do basic repairs yourself, or pay a management company or caretaker? If the house will be empty for long stretches, will you need to weatherize it? You’ll most likely need a gardener, and maybe a pool care service, or someone to remove snow.
Do You Need to Rent It Out? Renting out your vacation property may help defray the costs of its upkeep. In many locations around the country, you may be able to charge enough rent to cover your mortgage and a home maintenance program — and possibly even make a little profit on top. Factor in whether you’ll need a vacation rental manager who handles all aspects of renting for you, from booking to turnover. Be sure you research rental prices in your selected area before you buy, however, so you don't end up pricing yourself out of the market.
Of course, with the advent of Airbnb, VRBO, and other short-term rental companies, you’ll have to follow strict rules regarding the number of days you can rent out a second property, and some areas of the country have even outlawed short-term rentals. Do your homework, and always consult your financial planner and your tax advisor when considering this kind of purchase.
If you want to try turning a profit on your vacation home by using it as a part-time rental, skip the big cities and tourist-trap towns where home prices are sky-high and your mortgage might be, too.
Vacation Homebuyers Plan to Use Their Homes For:
 ATTOMData  HomeAway  AirDNA  NAR® Investment and Vacation Home Buyers Survey, 2017