Tips on Purchasing a Vacation Home

by Greg Cryns

            Is there a place where you’d love to spend all of your vacations?  A place that you’d like to visit so often that it makes sense to have a home there?  Or is there a place you like to visit so much that you can’t wait to spend your retirement years there?

            If this is the case, you may be thinking about purchasing a vacation property.  While this is an appealing idea, it’s important to make sure that you’re ready for the additional costs.  Many people who would love to have a second home find that they really don’t have the financial resources they need to purchase it. It’s important to do your homework before you buy a second home.  Make sure you know how you’ll pay for the second mortgage on the property 

if you need to finance it.  In addition, if you can’t afford to put down at least 10% on the home, chances are you’re not ready to purchase a second home.  Keep saving and wait.

            In addition, if you’re already strapped down by debt – especially credit card debt – your money would be better spent paying down your debt.  In the meantime, you can continue to visit your favorite places without making a permanent commitment.

            Before you purchase a vacation home, make sure to do your research.  There are wide ranges when it comes to vacation properties.  You may be better off financially by choosing a property that’s a little off the beaten path.

            Many people choose to purchase second homes and plan to pay for them by renting the property.  This can be a very profitable plan.  However, it can also backfire.  How will you pay for this property if you can’t rent it?  Make sure that your finances will allow you to keep up your payments even if you’re not bringing money in from rents.

            In order to make money on your property, you’ll probably have to rent it out at least 15-20 weeks every year.  Most of those weeks will need to be during the peak tourism season for that area – times when your family is likely to want to use it.  Make sure you’re willing to allow other people to use it during those times.

            In addition, you need to decide beforehand how you’ll manage the property.  If you hire a company to manage the property, you’ll have to pay a large percentage of your income to the management company.  However, if you manage it yourself you’ll need to be able to deal with the problems from a distance.

            For many people, vacation homes offer a great way to relax and take time off in their favorite places.  However, if you can’t afford to pay the mortgage and you’re not sure if you can rent the property enough to make a profit, you may want to consider waiting.

            While it will be fun to have a vacation property when your finances will allow it, a second home can also be a major drain on your finances if you can’t afford it.

 

Greg Cryns is the owner of Flat Fee Real Estate Guide - http://www.flatfeerealestateguide.com