1. Keep costs within your budget. Get pre-qualified for a loan before looking for that dream vacation home - unless you are paying cash. Consider these ongoing costs that come with a second home and how much ongoing income you will need to meet these obligations. These are costs incurred whether you rent the home or not.
- Monthly mortgage
- Real Estate Taxes.
- Municipal assessments
- Homeowners insurance
- Flood insurance (see my earlier article on this!)
- Emergency fund
- Travel costs for you to visit the property
2. How often are you going to use it? Is it a 2 hour drive, a one hour ferry ride or a combination that will make it difficult to arrange for that amount of time. Are family and friends a consideration in deciding on a location? If so, where are they coming from? Is the house suitable for use in the "shoulder" seasons?
3. Let's talk location. If the beach is important to you - the house you select should be close enough that you can get their. Additionally, if that is the paramount reason that someone would want to rent your property, make sure it fills that bill. Beach is not the only consideration. Think about transportation to and from the house, to town, to other recreational activities. Don't buy a house out in the woods, far from everything, unless you are using it to write the next great American novel and need the solitude!
4. Maintenance. The lawn will still need to be mowed even if you are not here. And, do you want to spend your vacation time mowing grass? Painting trim? Winterization? Some areas have homeowner associations who will let you know if you are not keeping your property up to par, but you can't depend on that - you'll want/need a caretaker. Many areas of vacation homes have a proliferation of property managers. Get recommendations though, because the last thing you want is the call that water is pouring out of the windows of your vacation home!
5. Income Potential. Find out about the rental market. What is the vacancy rate? What will it cost you to list your property on one of those vacation rental sites? Can you handle the calls and money or should you hire a local professional? If so, what will they charge? A local rental agency can give a realistic price range/date range for the rental of your property and provide some other useful services, such as meeting and greeting your tenants and handing over and collecting keys. All of this effects your bottom line, so don't be too easily swayed by the weekly rental number and remember, you are opening your home to people you don't know. Be prepared.
6. Selling Out or Trading Up. A second/vacation home is not usually a forever home, so gaze into your crystal ball and think about where you want to be in 5 years or 10 or whatever number and gauge how this property will fit into that plan. Will the property hold its value or are the kids hoping you'll pass it along to them. And consider the tax consequences. There could be capital gains taxes, depreciation recapture, etc. You need to factor this into the decision to buy that second home.
Your real estate professional is here to assist you in making this important decision and in answering these important considerations. A summer home can be yours - happily!