Sound Advice for Buying a Vacation Home You Won’t Regret
The best place to buy a vacation home depends upon you and your family’s interest. For example, if you like doing beach activities, then you need to purchase something near a beach, or if you like skiing, then Jackson Hole or Aspen, Colorado might be a good choice for you.
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Here are few points to consider BEFORE you buy a vacation or second home.
What is the Purpose of Buying a Vacation Home?
Are you buying a vacation home for pure investment purposes, for family fun, as a future retirement home, or perhaps your reasons are a combination of some of these factors. Before you buy, you need to have a well-defined and written out purpose for why you are looking to buy a second home.
You need to make sure you write the purpose down and reflect back on it during the buying process. This will make sure you are staying on track with your goal, and it will keep you from making an impulse purchase that you will regret down the road.
Set a Budget and Stick to it
It is important to always remember that buying a vacation home is a luxury purchase — it is not a necessity. There is nothing more heart breaking than to have a vacation homeowner come into your office and explain to you the financial hardship owning a vacation home is putting on their family.
To avoid this, I recommend paying cash for a vacation home and not financing it. If you don’t have the money to pay cash right now, that is okay. Simply wait until you do have the money before you make the purchase. Remember, life is a marathon, not a sprint. Most often, taking your time and being patient pays off.
Be Realistic in Your Expectations
If you are purchasing the property for pure family entertainment, be realistic on how often you are going to be able to actually use the property. If your kids are younger, then it is a little easier, but as they get older with school functions, sports, extra circular activities, and them just wanting to hang out with their friends will probably cut into how much time you will actually spend at the property.
If you are looking at it for a pure investment opportunity, be cautious when evaluating the money the house can bring in. Oftentimes, buyers get so excited about buying a second home that they make the numbers look better than they ever could ever actually be.
Return on Investment
You should see your biggest return on your investment when you go and sell the property. To make sure your house has a great appreciation rate, here are a few points of consideration:
What’s the Main Draw to the Area, and is it Stable?
What makes people want visit the area or buy a house in the area? You should do a little research on the area and know the future plans. Obviously, you do not want to buy a vacation home in the wilderness, only to find out that a major highway is planned to go right through your property.
Builders and New Properties
Are there a lot of builders in the area? Are there plans to build a lot of new houses? Remember, new houses keep prices down on existing homes, so this will hurt your resale value in the future if a lot of new houses are being planned to be built.
Have an Exit Strategy
Even if you are planning on owning the property for a long time, you should still have an exit strategy. This strategy is oftentimes hard to come up with, especially before you actually buy the property. However, you should think through how you would plan on getting out of the property if you have a financial downturn or if you really have to get out of the property quickly.
Considerations for Those Purchasing for Investment Purposes
Is there a large demand for long term or short term rentals in the area? How many weeks a year can you expect to have occupancy in your vacation home if it is set up on a short term rental? How easy is it to attract renters?
Supply & Demand
Is there a proper amount of houses for the demand? You don’t want to get into a situation where there is an oversupply of vacation homes as compared to the demand.
Check the Affordability of the Houses
Here in Orlando from 2006 to 2008, if I heard it once, I heard it a thousand times: “Houses always go up in Florida.” Well, that is not always the case. Make sure the vacation homes are affordable and have not appreciated beyond what is normal.
Investors: What considerations have you taken before buying vacation homes? Have you ever bought a second home you ended up regretting?
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