A vacation home can be a great long-term investment that pays off for you and your family for years to come. According to the National Association of Realtors’ Investment and Vacation Home Buyers Survey, Americans buy around one million new vacation homes every year.
It can also be a great source of rental income. In fact, 42% of vacation home buyers have the goal of generating income.
But is a vacation home right for you? Here are five things to consider before making your big purchase.
#1—You don’t want to break the bank buying a vacation home.
While it’s easy to get excited about buying a little cottage in your favorite beach town, you want to make sure that you’re not overextending yourself financially. According to Bloomberg, it’s best if your total combined expenses for your first and second homes add up to less than 30% of your annual household income.
#2—Yes, there will be maintenance.
A vacation home is not like a hotel—you’ll still have to wash towels, fix leaky faucets, put out trash, and mow the lawn. This can be more challenging if the vacation home is 500 miles away from your main residence. And if you only visit a few times a year, be prepared to do repairs and maintenance every time you visit (unless you hire a rental management company to take care of the details).
#3—If you want to make money, you’ll need to hire a rental management company.
A good rental management company can help you manage your rental property and lease it out to other people while it’s empty, helping you handle scheduling and maintenance—while generating extra income to pay the mortgage.
#4—Don’t forget about travel costs.
Remember that it’s not just the cost of the vacation home—your family will also need to travel to (and from) your new location. Consider the price of airfares or car mileage. The closer your vacation home is to your main residence, the less expensive travel costs will be.
#5—Know the area well before you buy.
Sometimes, tourists get starstruck by a vacation destination, and buy a second home on impulse. Visit a location at least two or three times before making a final decision. Make sure you understand what the town is like during peak periods—such as summer, holidays, or spring break.
Buying a vacation home somewhere in the U.S.? Our nationalnetwork of Realtors can help.