If you’re lucky enough to be considering a vacation home, then chances are you’ve already experienced the process of buying a home. While you may feel confident about the buying process, there are still some caveats when it comes to vacation homes.
Purchasing a vacation home is a big decision that shouldn’t be taken lightly. There are a lot of things to consider before making any decisions, and it’s important to do your research to avoid making any mistakes. In this blog post, we’re going to discuss eight mistakes people make when buying vacation homes.
Going Over Budget
This is perhaps the most important factor in preparing to purchase a vacation home. Take time to review your finances and determine what your budget is for your future property. The cost of owning a vacation home is not only what you pay for it, but also:
- Associated taxes
- HOA and condo fees
- Other items you may need such as furnishings or seasonal gear like water and snow skis, kayaks, jet skis, boats or other toys
There is no point in running around touring multiple properties with price tags that are beyond your reach only to discover that you don’t qualify for the purchase if you’ll be financing it.
Not Researching the Neighborhood
One of the biggest mistakes people make when buying vacation homes is failing to do their research. There are so many different things to consider when buying a vacation home, from the location to the type of property. It’s important to take your time and really think about what you’re looking for in a vacation home before making any decisions.
Consider the following questions when researching a potential neighborhood:
- How well do you know the area you want to buy in?
- What’s it like in the off-season?
- Do you like the weather year-round?
- Are there loud neighbors next door?
There’s a lot you won’t know about your second home if you only visit the area once or twice a year. That’s why a smart vacation home investment tip is to spend some serious time there or at least survey other owners in the area.
Not Researching Property Taxes for Vacation Homes
You will most certainly pay taxes on your vacation home so why not be prepared? Review with your mortgage specialist or real estate agent what to expect with regards to property tax, but also consider consulting an accountant for any other tax issues regarding your vacation home such as selling it if you reside in another state. Some states charge buyers and/or sellers a conveyance tax when a property is sold by or to an out-of-state resident.
Buying Sight Unseen
Due to a competitive real estate market that shows no signs of slowing down, second home buyers may be inclined to purchase a vacation property without visiting in person — a decision that could turn out to be a big mistake in the long run.
In an attempt to lock down an available property before someone else does, more buyers may be willing to buy sight unseen these days. However, studies show that homeowners are more often happy with their real estate investments when they’ve visited the area during both the peak and shoulder seasons.
Making an Emotional Investment
Many vacation home investors decide they want to buy a second property after returning from a great holiday. Rather than acting on those emotions, buyers should do their due diligence to make sure they fully understand what they’re getting into before jumping into such a major investment.
A common mistake that many people make when buying a vacation home is that they do not estimate the amount of time they are going to use the property. The amount of time you use your house or condo directly offsets your ROI.
Not Considering a Property Management Service
Unless you have a lot of spare time on your hands, a property management company is the way to go. They will handle things such as:
- General phone calls
- Reservations and booking
- Cleaning crews
- Maintenance and repair assistance, etc.
Managing your vacation rental yourself might seem like an easy task, however, it never fails that your guest gets locked out at 10 pm or they can’t figure out how to work the remote control or the air conditioning breaks.
A property management company offers 24/7 support for your rental guests which means you can rest easy knowing your renters are well taken care of and your investment property is safe and sound.
Counting on Rental Income
Know what the rental market commands in the area where you plan to buy your vacation home if you do decide to rent it out. There are many factors that influence rental prices and you don’t want to come up short if you are counting on that income to offset the cost of the property.
There are costs associated with renting out your property to consider such as advertising and property management. You may not be there to fix the fridge or air conditioner if it goes on the fritz in the middle of your tenant’s long-awaited vacation but it will need to be taken care of quickly.
Assuming You Can Rent Out Your Vacation Home
If you are planning on purchasing your vacation home for investment purposes and wish to rent out the property while you’re away, this may have special implications for financing. You will want to discuss this with your mortgage specialist if you are financing the property and not paying cash for it.
A lender may require that you obtain an investor type of loan rather than a conventional mortgage. This may also be the case with certain types of condo units in communities where rentals are frequent. While you may not plan on renting your unit out, the lender may consider this to be a rental community.
Also, it’s important to check with the community, neighborhood, town, and state for any restrictions on using the property as a rental unit. A real estate professional can assist you with getting all of the information you need to make an informed decision.
If you keep these eight mistakes in mind, you’ll be well on your way to finding the perfect vacation home for you and your family! For more information or assistance in finding a vacation home, please contact aDoor Real Estate today! We would be happy to help you in any way we can.