Five things to ask yourself before buying a vacation home
Things to consider before purchasing vacation property
Who doesn’t dream of a second home in a warmer climate, at the lake, or at your favourite ski destination?
Having a getaway home sounds fabulous—and it is! Just be sure you ask yourself the following five questions before taking the plunge and purchasing a vacation home.
Where should you buy?
Don’t think about buying somewhere unless you’ve really spent some time there. Make sure that you can’t get enough of your favoured destination before you commit, especially if you’re buying a home over a time share with location options.
Choosing where to buy also depends on where you currently live and how easy it is to get from one place to the next. Give serious thought to how you’re going to get there and whether it’s a good place for rental income. It’s also good to consider your current lifestyle and the one you want years from now.
Can you afford a second home?
Crunch the numbers to see if this is really something that you can manage. If not, your vacation dream home could easily turn into a financial nightmare. Make sure that you look beyond the sale price to calculate the true cost of ownership before moving forward.
Who will watch it when you’re gone?
Let’s face it, you won’t be spending 365 days a year in your second home. Infrequent visits will require hiring a management company to help maintain your home and the safety of your investment. It’s an added cost, but it gives peace of mind and avoids expensive issues resulting from unnoticed damage or theft.
Is it a smart investment?
Due diligence is key with any investment. Before making an offer, learn all you can about local zoning laws, construction standards, development plans, and other factors that may affect the long-term investment value of a second home.
Sinking a portion of your net worth into residential real estate can be a great way to diversify your portfolio. If the timing isn’t quite right to buy that idyllic warm weather retreat, the path to it could begin with a more affordable rental property close to home.
If you are investing in a vacation home, it’s smart to look for a place with part-time rental property value. Find something that you can rent out when you’re not there and help cover the costs of ownership.
Is joint ownership an option?
Pooling resources isn’t a bad option if you’re on great terms with your friend or family member. Just be sure to write up a detailed contract covering partnership, expenses, and time-sharing, as well as what will happen if one party wants out of the deal.