Buying a Vacation Home
Are you considering purchasing a vacation home, but not sure where to start? The best place is right here, with these considerations:
Before we go any further, the first thing to determine is what is your purpose of buying a vacation home:
Are you buying this home strictly for your family and friends’ use?
Are you interested in buying this home as an investment, to eventually sell in the future?
Are you purchasing a vacation home with the intention of listing it on AirBnB, VRBO, HomeAway, and other vacation rentals for rental income?
All of these will determine the answers to the next questions…
Where should you buy your vacation home?
If you’re purchasing for personal use only: consider a location where you know you’ll want to visit regularly, at least annually. For many families, this is a ski town in Colorado or Utah, a tropical oasis in the Bahamas, or a beach getaway in the Hamptons. Other families will purchase a vacation home near relatives that are a few states away from their home, so that they can spend time with extended family over holidays without feeling suffocated.
Avoid purchasing a home that’s within 50 miles of your primary residence – that’s hardly a vacation! Opt for a vacation home that’s unlike your primary environment instead.
Also consider your family’s utility – if you don’t love the ocean, why buy a beach house? Maybe you’d rather buy a secluded getaway in the mountains… when it’s for your own personal use, follow what makes you happy!
What is your vacation style? Have you seen the world as much as you’d like to – or are you happy with this being the location for most vacations in the near future? If you’ve got a family or are already well-traveled, a vacation home is probably an ideal investment for building memories together. But, if you think you’d still love to see more places, consider putting the investment off for a bit – after all, you may travel somewhere completely new within a few years that you realize would be your ideal secondary home location!
If you’re purchasing as an investment: analyze the market for appreciating values – your real estate professional and/or financial advisor should be able to recommend specific locations that have a historical appreciation value. These are usually not trendy areas, but rather classic, time-tested and family-loved vacation spots, such as classic beach towns (examples: Sea Islands along the East Coast, the Hamptons) and ski resorts (Park City, Vail, Jackson Hole).
If you’re purchasing with the intention of renting out: this is when it’s a good time to purchase a home within a 50-mile radius of your primary residence, unless you hire a rental management company to manage the property. These purchases should be treated as miniature businesses – because, well, they are (though their profits are not quite miniature – many people make upwards of $20,000 per month from just 1 property!).
You’ll want to consider:
Any restrictions on short-term rentals in the area (some places strictly do not allow them)
If any permits or licenses are required for renting the property
Will you have a company taking care of it – housekeeping, guest check-in and check-out, and so on?
Is the property near desirable attractions? Basically – would you and your family want to stay here? If not, it’s probably not a great investment…
Is the property the same as all the others around it? You may want to consider, for rental properties, purchasing a home that has a different quantity of rooms than the properties around it. Do all the homes in the area you’re researching have 3 bedrooms, but nobody has just 1-2 or 5+? It’s a good idea to purchase a home OUTSIDE of the norm to capture the potential people seeking to rent it.
Is buying a vacation home worth it?
A vacation home is a financial decision that can potentially appreciate its entire value back over time, recuperate its cost via rental income within a few years… or it may never bring money in at all, instead bringing the joy of family time and shared memories. Your purpose in purchasing the home is the only thing that can determine whether a vacation home is worth it.
How do I buy a vacation home?
The purchase is similar to the purchase of your primary residence – a Realtor will walk you through it. No matter what purpose you’re buying the vacation home for, be sure to factor in the cost of homeowner’s insurance, whether or not there’s a homeowner’s association (and if so, what the cost it, and what restrictions it entails), and if there will be any improvements necessary to update the space to your liking. With vacation homes, avoid being drawn to a fixer-upper, unless you’re literally purchasing it as a project because you enjoy fixing things as a hobby.