A vacation home is often seen as a luxury item and reserved for an elite class, but in reality, the act of acquiring a vacation home is the same as investing in the home you live in every day. It begins with assessing your financial situation, looking at a home and moving forward with the mortgage loan process.
Purchasing a vacation home can be a wonderful investment for a variety of reasons, but you need to go about it the right way in order to see return on your investment.
Vacation homes are growing in popularity
As the economy picks up, consumers have more confidence and the housing market continues to strengthen, people are turning to a second home. For example, CNBC reported that vacation home sales increased 57 percent in 2014 compared to the previous year. This brought the number of newly purchased vacation properties to 1.3 million, which was 21 percent of total home purchases last year.
This is a significant push for vacation properties, and something you might want to consider sooner than later if you have been tossing the idea around and have the ability to do so.
"Vacation home sales increased 57 percent in 2014."
Benefits your mental health
In a time when the mobile office is playing a major role in people's lives, the balance between work and life is blurred. Many people have their work email on their phone and are too willing to check it on the weekends and after hours. Likewise, the home office has grown in popularity as well, since technology has made it effective and convenient. But that too is causing people to work longer hours and not take enough time away.
Having a vacation home can help you overcome the demands of a wireless office and spend more time with your family and with yourself. When you visit your vacation home, you relax and get away from the normal routine. Take the opportunity to treat yourself, appreciate your surroundings and taking a break from your day-to-day cycle. Every once in a while, taking a pause and recharging is what you need.
Additional income is an option
Since your vacation home is only going to be used part of the year by you and your family, there is a great opportunity to make some extra money. You chose this home because of the location, and others will want to stay there for the same reason.
When establishing details, such as how much you would charge for rent and how often, you should also decide if you want to handle dealing with renters yourself or if you are going to hire a property manager. According to The Bigger Pockets, an online real estate magazine, having a property manager who resides in the area will help ensure that things go smoothly while you aren't there. Whether a renter has a problem, or maybe emergency repairs need to be addressed, having someone local is a great way to keep watch over your investment.
Costs to be aware of
Like any home, there are costs affiliated that might not be clear at first. This is always something to keep in mind when purchasing any home. Most costs you can plan for, such as electric and utility costs, simply by researching. But there are other factors you can't prepare for as much.
For instance, if your vacation home is located in a tropical place, are there regular storms that affect tourism and travel? How long would this prevent you from having renters and the additional income? When purchasing a vacation home, it is important to consider all the aspects of a location as well as the home itself.
Responsible ways to approach purchasing a vacation home
You should spend time in the home you are thinking about purchasing. Just because you have been to the location several times doesn't mean you can account for the home itself. It is important to treat a vacation home as any other home purchase, with a thorough inspection. As highlighted by Forbes, a vacation home is different than a timeshare, in which you could simply swap one location for another when you want. A vacation home is a home like any other, and it requires commitment.
Additionally, you should know that just because it is a vacation doesn't mean there is a lack of upkeep. While that should certainly be the focus, homes require upkeep. Therefore, don't choose a home that will be difficult to take care of. Remember, this is not just a vacation home but your second home, so you want to be able to manage its property.
"Having a vacation home can help you prepare for retirement."
Purchasing a vacation home can be a great investment providing you an escape from your daily routine. Take your time, do your budgeting, talk to your lender and real estate agent and select a home that works for you and your family.
Also, as you think about your retirement options – perhaps you will want to be in the home you have lived in for so long, or perhaps you will want to make the trip to your little paradise and retire there. If the latter is your thinking, then purchasing a vacation home now can put you financially ahead in the long run.