Is now the time to purchase a vacation home?
Consider the pros and cons of vacation home ownership before you buy
People often imagine vacation homes in warm, tropical locations. Others dream of a vacation home near a peaceful lake, or maybe a quiet home in the country. Some people prefer mountain lodges, while others want a modern loft in a big city.
Whatever the setting, a vacation home purchase can be an ideal combination of enjoyment and investment. But people who are considering a vacation home investment should be mindful of the many expenses associated with owning another property.
Vacation Home Purchases: Pros and Cons
1. Affordability. Homes today, including many vacation homes, are more affordable than in years past. According to a recent report from CoreLogic, “Although clearly less accessible than a year ago, yes, housing remains affordable in the current market.”1 Prices vary greatly by region, so be sure to research price trends in your desired locale.
2. Low interest rates. Rates are still near historic lows and can make monthly payments more comfortable for people who finance vacation homes. Depending on your situation, you may also be able to deduct mortgage interest on your taxes.
3. Rental income. Those who rent their vacation home can realize some income that may help offset expenses. However, the IRS has special rules for vacation rentals, so be sure to consult a tax professional about your own situation.
1. Expenses. Vacation home buyers need to account for taxes, insurance, utilities and, for financed properties, mortgage payments. They also need to budget for maintenance and repair costs, along with homeowner association fees in some communities.
2. Management. Depending on distance, owning a property that’s far from home will require assistance from a local property management company. Vacation home owners will need to budget for management fees and find a property manager they trust.
3. Net cash loss. High expenses and variable rental income often mean that many vacation homes are net cash flow losers. Prior to purchase, investors should carefully weigh costs and benefits to determine how much they’re willing to pay for the privilege of owning a vacation home.
One Last Consideration: Quality of Life
People purchase vacation homes for many reasons. One benefit that’s harder to measure is the enjoyment and quality of life that comes from owning a vacation property.
Vacation homes can be a source of many happy memories for the people who own them, but investors should carefully consider the full cost of ownership.
Are you thinking of buying a vacation home? What do you see as the biggest advantage or disadvantage?
Originally published by VelaView. Photo courtesy of Jourdan Group.