I have been a property manager here in Orlando since 2006, so I feel very confident in advising investors on buying a vacation home. Here are eight tips you should consider before you go and put money down on a vacation home.
8 Factors to Investigate Before Purchasing a Vacation Property
Know All Your Costs
Before you sign a contract, do your homework and know exactly what the true carrying costs of your vacation home are going to be every month. The carrying costs should include: mortgage, home owners insurance, property taxes, HOA fees, property management fees, pool service (if you have a pool), lawn service, monthly utility bills, etc.
I recommend after you have calculated all your expenses, you should make sure you have no problem paying these expenses even if your vacation home brings in zero monthly income. I have talked to too many investors over the years who bought a vacation home they could not afford and whose home became an anchor on the family’s finances.
Find a Good Property Manager
A good property manager is key if you are going to be owning a vacation home. After all, the manager is the one who is going to be looking after your investment when you are not in town. A vacation home can deteriorate very quickly if the house does not have proper care.
I recommend driving around the neighborhood where the house you are looking to purchase is located and find homes that have good curb appeal. Then find the property managers who manage those homes. Chances are if a property manager is taking great care of the outside of a vacation home, then the inside is usually very nice as well.
Travel to the Vacation Home Location Before Purchasing
You will want to travel to the vacation home location quite often and make sure this area is where you and your family will want to travel and spend most of your vacations. You should also make sure that the area is easy to get to. I’m sure it is nice to have a vacation home in the mountains, but if it takes you a plane ride and a 3 hour car ride to get to, chances are you probably will not be visiting your vacation home too often.
Learn About Peak Time
If you are going to looking to get rental income from your vacation property, you should be aware that the most popular travel times will bring you the most rental income. So if you need income from your vacation home to make the deal work for you and your family, then you will probably need to use the house during the off season when the demand is not as great.
Know That Owning a Vacation Home is Not Always a Vacation
If you are pretty handy or if you want to save money, just be aware that when you visit your vacation home there will probably be a couple of days that are dedicated to doing general maintenance and repairs to your property.
The National Realtor Association has stated that the annual upkeep on a house should be around 2% of the value of the house. So if a house is around $150,000, then the owner should expect to spend around $3,000 annually on repairs and upkeep to keep the house in the same condition. The same rule goes for vacation homes.
Be Aware That Lifestyles Do Change
My wife and I have a vacation home in Destin, Florida. When our kids were younger, we used the house all the time. Now we visit our property about every 18 months or so. As your kids get older, their lives become more hectic with sports, school, and church activities so there is not as much free time.
Check the Crime Rates
You will want to check the crime rates of area and make sure that you are purchasing a home in a safe place. High crime will kill a vacation hot spot quicker than anything.
Learn the City’s Future Plans
Go to the city planning board website or do some investigation on your own to see what future plans are for the city. This insight will be extremely helpful when you go to actually purchase a property.
I hope these tips help you when you go to purchase a vacation home. The biggest tips I can give any potential vacation homeowner is to be realistic in what you can afford and do not overreach when purchasing a vacation home. After all, a vacation home is a luxury item that has turned into a nightmare for far too many families.
Have any other tips for prospective vacation homeowners?
Let me know in the comments!