Nov. 27, 2018
Imagine waking up to the sounds of the waves crashing on the shore outside your very own home. You don't have to worry about calling ahead for reservations, asking anyone for a key, or having an exact time to check out by when you decide that it is time to leave. This house is all yours to do whatever you want with, it's your very own vacation home. However, before you get too caught up in any fantasy consider some of the pros and cons of owning a home away from home.
Vacation Home Aren't for Everybody
There are many financial pressure that the real estate market responds to. Most people are just waiting for their favorite vacation spot to experience a market correction. If you're one of these people, don't jump into the vacation home market without really considering what you are doing. Of course it would be cool to own a vacation home, but if you never use the home it could be the wrong call. Here are a few points to consider when buying a vacation home.
What can you afford?
Many vacation homes will be on the market for several times the price that your personal home is worth. Due to this big increase in price, many buyers will try to pool their assets together with family or friends to purchase a vacation home. Doing this might seem like the right plan but buying a vacation home with anyone that you are not married to can result in a long term problem. There can be many problems that arise when you try to pool your assets with a friend such as a disagreement on location or even your co-borrower having poor credit and being unable to pay part of their down payment. Once you've bought the property the question of who pays for what repairs could arise as will. Make sure that you get a lawyer to draw up a maintenance and payment agreement that you both sign to get everything on paper and make it official.
Buying a vacation home on your own can still be complicated.
When you buy a vacation home, you’re almost always going to use a conventional mortgage. Make sure that you have great credit, debt to income ratio and, most importantly, a lot of cash. Being a owner of a secondary home can been seen as very risky to the banks.
They should still lend to you, but they’ll want to see that you have anywhere from two to 12 months of funds already in an account somewhere that are equal to a certain number of months’ worth of payments for both of your homes. This also includes anything wrapped into your payment due to escrow, like homeowners’ insurance and taxes.
Off-season care and maintenance
If you have friends or family that live near by your vacation home, you are probably all set when it comes to off-season care and maintenance. However if this inst the case this is something you should think about before purchasing a vacation home. This plan should consider the problems that develop overtime as the wear and tear happens when no one is looking. Since your property is a vacation home, it will also require more expensive insurance coverage, as well as specialty insurance if it’s in an area where floods, hurricanes or earthquakes are common.
Selling can be difficult and costly.
For every one of the real estate experts who claim that buying a vacation home is a great way to make money, there are experts who realize that the market is unpredictable and you may find that you don’t love that vacation home as much as you thought in a few years.
After spending two years dealing with short term renters, you may decide it’s easier for you to go back to renting a nice hotel for your vacation stay, rather than owning a headache of a property. That’s a good idea, until you find out that not only has the market bottomed out, but you can’t even get enough money out of the place to cover the mortgage and your closing costs.
If you still think that a second home is still for you after looking over this list, proceed with caution. Avoid buying a project house unless you have someone else to do the work so that you can relax and enjoy your vacation home to the fullest when you come to stay.