Things to Know Before Buying a Vacation Home
Want a home that puts you within walking distance to the cool breezes of the Pacific Ocean? Or live 24/7 with magnificent views of the city in the mountains and the beautiful scent of pine trees.
You’re not alone. Many people each year make a vacation destination a reality by simply purchasing a home in their desired location for a place to unwind and recharge. Essentially, a vacation. Before you do this, there are some items to think about.
1) Be aware of how much you can afford.
Logically, this is an important item so evaluate your finances and figure out the cost of owning a vacation home.
You’ll have to take into account the property taxes, insurance, and HOA fees, and of course the monthly payment.
2) Know where you want to be.
What exactly do you want or expect from a vacation home? Do you want peace and quiet where neighbors are few and your privacy is a top priority? Or are you looking to be close to the hustle and bustle of a busy downtown, restaurants and nightlife? Is boat access, a boat slip or dock a must? Is proximity to a large hospital or urgent care medical facility important to you?
vacation home in Southern California Mountain Area
Pick a location that you’ll travel to often and that you love.
Maybe you’re fortunate enough to already own a home near the ocean in California or you want to buy a new condominium on Pacific Coast Highway. Perhaps you’d like a change of scenery to a place in the mountains with peace and serenity in Running Springs or Big Bear or in states such as Oregon or Washington.
3) Schedule carefully.
It may come across as ridiculous, but in some cases, organizing the dates you’ll visit your new vacation home can help you relax more and appreciate it.
Will you use the home numerous times a year or two weekends each month?
Do you anticipate this to be your home once you retire?
According to a survey done in 2015 by the National Association of Realtors ®:
42% of vacation home buyers intend to use their property for vacations or as a family retreat
25% of vacation home buyers purchase in a resort area.
21% intend to transform their vacation home into their primary residence in the future
36% of people bought in a beach area, 12% bought in a lakefront area
4) Don’t assume you can rent out your vacation home.
If you are planning on purchasing your vacation home for investment purposes and wish to rent out the property while you’re away, this may have special implications for financing. You will want to discuss this with your mortgage specialist if you are financing the property and not paying cash for it.
A lender may require that you obtain an investor type of loan rather than a conventional mortgage. This may also be the case with certain types of condo units in communities where rentals are frequent. While you may not plan on renting your unit out, the lender may consider this to be a rental community.
Also, it’s important to check with the community, neighborhood, town, and state for any restrictions on using the property as a rental unit. A real estate professional can assist you with getting all of the information you need to make an informed decision.
5) Be realistic about rental income.
Know what the rental market commands in the area where you plan to buy your vacation home if you do decide to rent it out. There are many factors that influence rental prices and you don’t want to come up short if you are counting on that income to offset the cost of the property.
There are costs associated with renting out your property to consider such as advertising and property management. You may not be there to fix the fridge or air conditioner if it goes on the fritz in the middle of your tenant’s long-awaited vacation but it will need to be taken care of quickly.
6) Taxes are a sure thing.
Consult with your mortgage originator or real estate agent about the property tax, and also think about speaking with a CPA or tax preparer for any other tax concerns regarding your vacation home.
7) No better time to start than now.
You may have guessed right but there’s low inventory of vacation homes as well as real estate in Orange County and other counties in California. More home buyers have pushed the median vacation and investor home purchase price higher in 2017 over 2016.
If your goal is to own a vacation property, then right now is one of the best times to purchase a vacation home because mortgage rates are near all-time lows.
