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A vacation home can provide a fun getaway destination for your family and friends.
And if you’re buying a vacation home to rent, it can also be a financially worthwhile venture. And with rental marketing sites like Airbnb offering the possibility of rental income to help pay the mortgage, owning a second home in a resort town is no longer just for the wealthy. But vacation properties require significant investments in time and money, so it’s a good idea to consider the home purchase in detail.
Here are seven questions to ask yourself before signing on the dotted line.
- How well do you know the area?
Many places seem quant and captivating when you’re there for a short visit. But it may be an entirely different experience to live there or spend significant time there each year. Thoroughly research the neighborhood and surrounding area, including the climate, crime rates, property taxes, accessibility, and local attractions.
- Does the location you’re considering have longevity as an appealing destination?
Vacation spots tend to be trendy in nature. Today’s hotpot may not necessarily have the infrastructure to sustain a long term rental market. Also, make sure the city or town holds appeal to you and your family year after year since you will be visiting for the long-term.
- If you’re planning to use your second home as an investment, how attractive are the nearby amenities?
Certain high-end attributes will make your rental more marketable. A waterfront location, ocean or mountain views, walking distance to the slopes or the beach, or proximity to popular attractions, community amenities, and public transportation, for example, all have tremendous appeal for potential renters.
- Is rental even an option for the location you’re considering?
The right vacation home location makes all the difference. Many counties, cities, and towns in vacation destinations prohibit short-term rentals. Or they restrict them to a limited number of days a month. You may also need a license and be required to pay innkeeper taxes. That’s why plenty of advance market research is critical.
- What’s the plan for the upkeep and maintenance, especially if you are planning to rent it out?
Maintenance issues often require quick resolution. When guests are staying in your vacation home, it can be a nightmare to address their maintenance emergencies promptly. Make sure you have a solution in place if you are not willing to be available 24/7.
- What kind of vacation home should you buy?
You need to decide if you want to buy a single-family home, an attached home like a condo or townhome, or a timeshare. Each has its advantages and shortcomings. A single-family home offers control over how the home is used and by whom. But maintenance can be expensive and time-consuming. Purchasing a condo or townhome reduces maintenance obligations if it includes paying monthly homeowners association fees to cover upkeep. However, condos and townhomes may have rules in place that restrict the ability to rent it. With a timeshare, there is no purchase of real property; rather, buyers purchase it the right to use it for a certain period of time. They’re often less expensive than property purchases but popular dates like winter vacations and national holidays get booked up quickly so advance planning and reservations are necessities.
- Can you really afford it?
Buying a vacation home to rent is an expensive proposition. Unless you’re intending to pay cash, you’ll need to apply for a mortgage. Lenders are more particular about approving a second home mortgage because they’re generally considered subordinate to the primary home mortgage. That means you’ll have to pay the first one back before the second one if you default on the loans and go into foreclosure. And it’s not just the purchase price itself that will put a dent in your bank account. Utilities, property taxes, HOA fees, specialty insurance, pool and lawn maintenance, and cleaning services are among the other expenses you may have to factor into your budget. And of course, those unexpected incidentals can always crop up, such as needing a new roof or have to hire an exterminator.
Going on vacation is fun, but forking out money for lodging definitely is not. Owning a vacation home can allow you to get away without having to search for a decent place to stay and pay handsomely for it. To make the best choice for your specific situation, it’s wise to consider the purchase carefully and enlist the guidance of a qualified real estate professional and a financial advisor.
The Certified Title team is here to offer helpful insights and valuable resources that enhance all types of residential and commercial real estate transactions. To make your vacation rental property purchase its most successful, please contact our knowledgeable professionals.
About Certified Title Corporation: Since 1994, attorney-owned Certified Title Corporation has been furnishing residential and commercial real estate stakeholders across the nation with robust title insurance, settlement, and escrow services. Renowned for industry-leading reliability and an exemplary level of service and quality, the Maryland-based company helps clients from all walks of life achieve their asset goals. To learn more, call (888)486-5511 or visit www.certifiedtitlecorp.com/.