As it warms up, we can’t blame you for thinking ahead to a sunny summer vacation. But is it a vacation you want or is it time to invest in a vacation home? Buying gives you a space just for you, where you can kick back and relax every vacation — without ever having to worry about booking a hotel.
But once you’ve decided to buy, the big question is where? The United States is packed with beautiful scenery and great vacation destinations, whether you prefer to relax on a peaceful hike through the woods or enjoy the sun and sand of the beach.
There’s no right answer, but here are a few things to consider before you decide on your dream vacation home.
Is it a place you’ll enjoy going back to? A vacation home is an investment, and you won’t want to buy if you’re just likely to want to go somewhere else next year. Before you make up your mind, spend some time in the different places you’re considering buying to help decide whether it’s the right place for you.
How far away is it? There’s not much point in buying a vacation home that’s an hour’s drive away — but a vacation home that’s several states away means a good amount of travel time whenever you want to visit. That could mean you don’t make much use of your vacation home.
How often will you visit? If you’re only going to make a vacation getaway once a year, buying may not make sense unless you also plan on treating it like a vacation rental property. But if you’re likely to make a road trip to your new vacation home once a month, buying may be more reasonable than staying in a hotel every trip.
Can you afford it? No matter how good the rates are, taking on a mortgage is a pricey endeavor. Calculate the costs — including down payment, utilities, maintenance, insurance and any other extra expenses owning could incur — and see if it fits into your budget before you decide to buy.
What are the tax consequences? Don’t forget taxes when trying to decide whether you can afford a vacation home. You’ll want to consult an accountant or tax advisor to see how buying a second home will impact your taxes. Talking to your accountant or tax advisor is even more important if you plan on renting it out to pay the mortgage, which can have tax benefits and consequences.
Will you be able to rent it? One way to help pay for your vacation home is to rent it when you aren’t there. If you’re interested in renting your new home, you’ll want to investigate whether there’s a demand for vacation rentals in the area. While an isolated mountain cabin might be your idea of an ideal vacation home, if you plan to pay for it with rental income it could be a little too isolated to draw a large pool of potential renters. And if you’re counting on rental income to pay the mortgage, be reasonable about how often you’ll be able to rent it and for how much. If your purchasing plan relies on rental income to cover the whole mortgage, you may want to rethink whether you can afford it.
Will you be able to sell it? Check out property values in the area. Have prices been going up or down? Are homes selling quickly or are they sitting on the market? Ask your REALTOR® in advance to help gauge how easy it will be to sell the property in the future.
Think long term. There’s a chance you may not want to sell your vacation home, because it could make sense as a retirement home in the future. If you’re considering your vacation home as a place to settle down for retirement, be sure the home will be easy to navigate when you’re not quite as spry — avoid stairs and look for homes that are ADA compliant. Also consider how convenient your home is to nearby resources, from grocery stores to hospitals.