1. Choose Your Location Wisely
Choosing the right location is essential, so take plenty of time to think it over. Consider the following points.
- Think long-term: You need to be sure that the location you pick is somewhere you can realistically see yourself returning to year after year.
- : Consider what facilities you might need easy access to, such as hospitals, restaurants or kids’ activities.
- How will you get there? If you must take a long journey to reach your holiday home, will you still be inclined to make that trip as the years roll forward?
The best advice is to visit your chosen destination several times before buying property. This way, you can see if the novelty wears off after you’ve been there a few times.
2. Think About the Type of Property You Want
When you’ve decided on the location, look at the different types of properties available and think carefully about what you’ll need from your vacation home. For example, do you plan to use it for quiet getaways or large family get-togethers? Will you rent it out to other guests when you’re not using it?
Like buying a regular home, consider how many bedrooms and bathrooms you’d be happy with, as well as any other features that are essential to ensuring you’ll get the most out of your vacation home.
3. Consider How Much Time You’ll Spend There
It’s also important to figure out how much time you’ll spend at your vacation home. Are you looking for somewhere you can escape during weekends, or somewhere you’ll only visit once or twice a year? Perhaps you’re thinking about making your vacation home your primary home once you retire.
If you’re only planning to use it every now and then, it’s probably not worth the time and money.
4. Think About Your Vacation Home as an Investment
Realistically, most people only spend a few weeks in their vacation homes each year. So think long and hard if it’s worth the cost and calculate how many years of renting similar properties it would take to match the price of buying your own place.
Of course, it doesn’t have to be empty when you’re not using it. By renting it out, it could eventually pay for itself. You may find long-term tenants, various short-term renters, or maybe even friends or family members.
Beyond renting it out, consider the resale value. Ideally, seek a home that would appeal to a wide range of people.
5. Learn the Law of the Land
Laws differ in different areas, so it’s worth becoming familiar with the regulations and restrictions in your chosen location. For example, if you plan to buy abroad, make sure that foreign investors can legally purchase property. The same applies to renting out the vacation home — in some areas, you might not be able to do it, while other places may have various restrictions in place.
6. Crunch the Numbers
Like any real estate investment, you must create a watertight budget before looking at properties. First, figure out what you can comfortably afford to spend on your vacation home and stick to that figure. Otherwise, it’s easy to see your dream vacation home for sale, fall in love with it, and end up overspending. If that happens, there’s a good chance you’ll end up stressing more about it than actually enjoying it.
When creating your budget, you must consider several things beyond the property’s price. Here are the other costs you need to factor in:
- Utility bills: Like any home, a vacation home will use up energy, especially if you rent it out—visitors are unlikely to go easy on energy consumption, so factor this into the rental price.
- Insurance: Many lenders insist you take out a home insurance policy on your vacation home. Even if they don’t, or you bought the house outright, it’s worth purchasing insurance. Plus, if you plan to rent the property, you’ll typically need to take out additional coverage.
- Tax: Factor in property taxes, and if you’re purchasing as an out-of-state/country buyer, you may also have to pay a conveyance or land transfer tax.
- Renovations and maintenance: If you plan to rent your property out when you’re not using it, ensure it looks great and that all maintenance tasks are up to date. Even if the home sits empty for a while, you’ll need to keep on top of things.
- Extras: Consider fitting your vacation home with seasonal gear and equipment for local activities, such as skis or kayaks.
- HOA fees: Like other homes, some vacation homes will be part of a homeowners association, so be sure to add the necessary fees to your budget.
- Property management services: An almost essential cost if you’re renting your property out.
Also, bear in mind that most lenders require you to pay a sizeable down payment on a vacation home. In most cases, you’ll need to put down at least 25%, but some lenders may insist on as much as 50%.Image: karamysh / Shutterstock.com
7. Hire a Property Manager
It costs extra to hire a property manager, but it can be well worth it. Leaving your home uninhabited for months on end can result in significant damage. For example, a leaking, or worse, a burst pipe, can create massive water damage, while pests can wreak havoc on an empty property in a few months.
By hiring a property manager, you can rest easy that they’ll be able to stay on top of these issues. And, if you’re planning on renting your vacation home, a property manager will take care of that side of things too.
8. Consider Sharing the Costs
You don’t have to go it alone when buying a vacation home. Maybe you have friends or family that would also enjoy it. In this case, it could be possible to pool your funds and share the property. This can save you a lot of money, but you do need to communicate clearly from the get-go. Be sure to discuss the following points:
- Financing: How will you split the payments, whose name will the property be in, and what happens if one party wants to sell?
- Property use: Be sure to plan your vacations to ensure you don’t clash.
- House rules: Be clear about these from the start and make sure everyone agrees.
Take time to discuss these things, and if you’re not on the same page, it’s perhaps not the best idea to proceed.
9. Don’t Rely on Rentals
If you’re planning on renting your vacation home out while you’re not using it, do your research first to make sure it’s a viable plan. Check the local market to see how competitive it is, and think about the type of tenants you’re looking for: holidaymakers, long-term, short-term, etc.?
Additionally, it’s worth bearing in mind that you might not be able to take out a standard mortgage if you plan to rent your vacation home. Lenders may require you to take out an investor-type loan instead. And then, don’t forget about the additional costs and possible barriers.
In many cases, it’s best not to rely on renting your vacation home out. Instead, consider it a bonus, not a necessity.