Why do people buy vacation homes?
Buying a vacation home is an investment people make for both personal and financial reasons. You do not need to be an experienced entrepreneur to search for other ways to contribute to your income, build wealth, plan for retirement and enjoy a summer vacation with no extra costs.
This market is seeing steady growth because buyers are increasingly looking for a second home for leisure and relaxation, spending quality time with family, and pursuing hobbies such as farming and fishing. Vacation homes make up 5-7 percent of the property market and are preferred for the serenity, weather, infrastructure and potential for rental income that they offer. When you buying a vacation home and choose to rent it out, you can create short-term rental revenue generation.
By buying a second home you can even join a community of savvy investors who understand the value of real estate holdings. Thus, your home can be an investment property or a legacy that you leave behind for the next generations.
The Do’s of Buying a Vacation Home:
Take the Right Property Management Advice
You can diversify your income and plan retirement through basic expertise of rental real estate science. You want to work with an agent who has the required competency and vacation rental savvy to help you buy a vacation home with a good cap rate in a great market. As you move closer to retirement, the amount you owe on your vacation home mortgage will be smaller, or it may be paid off completely.
Meanwhile, with the right property management company looking after things, your second home will be well taken care of until it’s time for you to retire there. Additionally, when you are renting a vacation home you may bring in some extra cash but it can also cost you at the same time. Your guests may not care about your bills, the damage they do or the furnishings they ruin until a property manager stops by once or twice during each guest rental to restate your house rules and keep an eye on how your vacation home asset is actually being used
Look Out for Extra Costs
You need to be very vigilant of the utility costs which may be hidden at your initial purchase of the house. You might be paying two mortgages as well as double other costs. Thus, you should also consider, according to Baron Christopher Hanson, lead consultant and owner of RedBaronUSA, a business turnaround consultancy that includes a real estate development startup, M3MOD, which specializes in coastal, rural and mountain homes made of reclaimed wood, brick and stone.
Be aware of what your vacation home will cost during the entire 12 months or all 4 seasons in a year. Expenses to watch for include homeowners association fees, required landscaping or mandated infrastructure projects. But most importantly the hidden local costs that come with maintaining a vacation home – surprise but easily predictable costs that real estate salespeople may not mention upfront. You need to ask yourself the questions such as whether it will get cold enough for your pipes to freeze and burst open or if the property will become hot or moist enough to encourage aggressive molds, pests or building material decay.
The Don’ts of Buying a Vacation Home:
Avoid Making Baseless Assumptions
Consult a tax professional for reviewing your rental income options. If you plan to rent out your home, you’ll need to report the rental income on your taxes unless you only rent it out for under 15 days. In that case, you get to keep that income tax-free. If you plan to combine a lot of vacationing and renting then things may start to become messy with your taxes. However, if you plan to do a lot of renting as if it is your side business then you can deduct a lot of expenses that go with maintaining a rental.
In connection with this, when buying a vacation home do a lot of thinking about your cost. You shouldn’t buy a vacation home with the idea of simply renting it out to justify the cost of buying the house. For things may not always work out that way. The short-term rental market is incredibly competitive and already filled with second home owners trying to eke out next month’s mortgage payment by attracting a short-term renter. This points to the fact that although rental money is a great investment, you should not entirely count on it.
Don’t Miss out Choosing the Perfect Property
Accessibility and a perfect location are the most important things to consider when buying a vacation home. It should be at a max 4-7 hour drive from your residence, has a naturally ambient environment and is close to a railway station or expressway. Hence, it won’t even be very tedious when you plan on reaching your vacation home every weekend or fortnite. Thus, choose a place that is reachable rather than a home in some remote location. Infrastructure also plays a big role.
Proximity to services and amenities such as commercial centers, medical facilities, restaurants and such like adds substantial value to the second home if you’ve bought it as an investment. Lastly, safety needs to be fully examined before you spend your money on the house.
Go for gated properties with adequate security staff and CCTV, if possible, as vacation homes that aren’t under regular occupation are prone to the risk of encroachment and theft, given their lack of proximity and the fact that their limited use by the owner is easily noticeable by outsiders. This is a place that you will be owning for quite some time or even as long as you live and then pass it on to your children and grandchildren. Therefore, the locale needs to be secure and closer to downtown or city life. Here you can avail all the facilities ranging from hospitals, markets, train stations and much more.