With summer fast approaching, it might seem like the time is finally right to get that vacation home you’ve been dreaming of for a long time. Maybe you’re picturing a home just steps from the beach or a lakefront oasis where you can gather with your family.
Before taking the leap on a second home, it’s important to fully understand what buying entails.
factor in all costs
“Owning two homes would mean you would also be paying twice as much for almost everything,” rocket hostage tells. “This can include another mortgage, property taxes, utilities, home insurance, homeowner’s association (HOA) fees, and monthly heating and water bills.” Other costs to consider include furnishing and decorating the home, transportation to and from the property, and hiring a rental or property management company.
The cost will also vary depending on where you decide to buy, Kiplinger notes. The financial website says, “If you buy where skiing is popular, the heating bill can be substantial,” while “the same goes for the electricity bill for air conditioning in hot climate locations.” And then if you want to buy in coastal Florida, for example, the reality is that “you have to have storm shutters and have someone on hand who can quickly enforce them and secure your property if you away from the storm is coming,” Kiplinger They say.
consider your goals
Too often, people make an “emotional investment” when they buy a vacation home, say travel + leisure, Rather than focusing on the warm and fuzzy feelings you’ve gotten from recent visits to a location, potential buyers should think carefully about how they’ll be using the home — and how often.
“And, especially, for buyers who want to use the property as a short-term or vacation rental, it is important to establish clear financial goals,” said Sean Greer, vice president of sales and marketing at international home management company Vacasa. travel + leisure, In addition, how often you rent out your vacation home versus live in it will affect the taxes you pay and the deductions you take, according to Kiplinger,
Location “is very important when it comes to a vacation property, especially if you plan to rent a home,” rocket hostage They say. Instead of focusing on areas already saturated with rental properties, try searching for areas where “there is opportunity to fill demand.”
Keep in mind, however, that while more attractive locations can lead to more willing renters, it can also lead to a higher purchase price. If you’re looking for bargains, “get away from central locations and extend your search to outlying areas,” Kiplinger gives suggestions.
Research the neighborhood – especially its rental regulations
Buyers often make the big mistake of not doing enough research on the area where they are buying. This is especially important for people who plan to rent out their home, because “some homeowners or condo associations don’t allow short-term rentals all the time, and some renters are required to use facilities such as a pool or gym.” may prevent you from using the features. Kiplinger They say.
Also be sure the area will have other amenities you’ll need, such as “strong cell phone and Wi-Fi service, as well as proximity to stores where visitors can buy food and supplies,” travel + leisure adds up.
don’t skip the home inspection
In a competitive real estate market, buyers may be tempted to move fast now and ask questions later. “Vendors often favor ‘clean’ contracts with as few contingencies and additional requests as possible,” Kiplinger accepts, but “it’s generally a bad idea to skip the home inspection.”
“More buyers may be willing to buy things unseen these days, but we find that homeowners are happier with their real estate investments when they are both peak and shoulder,” said Sean Greer, vice president of sales and merchandising. visits the area during the seasons.” Marketing at International Home Management Company Vaikasa, told travel + leisure,
Know that mortgages for other homes are different
Interest rates tend to be “slightly higher for second-home mortgages than for primary-home loans.” Kiplinger. Additionally, a down payment of at least 10 percent is required, and some lenders may require as much as 20 percent.
Applicants should also be aware that the minimum credit score requirements for second homes are even more stringent. “If you have a loan-to-value ratio (the amount you owe on the loan as a percentage of home value) greater than 75 percent, you may need a minimum FICO score of 680 to qualify (ranges from 300 to 850.” scale) compared to about 620 to 640 for primary-home loans,” Kiplinger telling.
Becca Stanek has worked as an editor and writer in the personal finance space since 2017. He previously served as managing editor for investing and savings content at LendingTree, an editor at SmartAsset and a staff writer for The Week. This article is partly based on information first published on The Week’s sister site, kiplinger.com,
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