Photo via Unsplash

 

Maybe you’ve paid off the mortgage on your primary home or are close to it. Visions of beach bungalows or mountain retreats have been swirling around in your head for months now. Investing money in a vacation home makes sense for over a million baby boomers each year. Does it make sense for you? Vacation homes can provide you an added layer of financial security as well as a priceless contribution to your family. Before you start house hunting just yet, though, you’ll want to read these tips:

 

Location, Location!

It’s best to start with your end goal in mind. Are you looking for a vacation getaway where the whole family gathers, or is it more important your vacation home be within driving distance? Would you like to use your second home as a rental property when you’re not there? How about as your retirement home one day? As you begin to pinpoint what it is you want from your vacation home, you’ll be closer to identifying your desired area(s).

 

Once you’ve narrowed it down to a few locations, consider the average listing price for homes there. According to the National Association of Realtors, the most popular location for vacation homes is in the South, and the second most popular is on the West Coast. Take Sunrise, FL, for example. The median list price for a home there is $200,000, versus $729,000 in San Diego.

 

Spend significant time in the area, and visit during each season. Talk with residents, and ask them what they like about living there as well as what they don’t like. Pick up the local paper to get a feel for community events, political issues, tax issues, etc.

 

If you want to rent out the home in your absence, make sure you’ve done your homework. Some communities only allow monthly rentals vs. weekly. It all depends upon the homeowner’s association and the city laws. With the popularity of Airbnb and other services, renting your second home could be a very appealing option.

 

Be sure to check out crime in your desired area as well as quality, accessible health care in case you decide to make your vacation home your primary residence one day.

 

Your Best Resource: An Experienced Real Estate Agent

 

Check out at least 10 homes with your agent, both above and below what you can afford. This will give you a more accurate picture of the housing value in your desired area.

Because second-home sellers are often more flexible when it comes to pricing and terms of a sale, a good real estate agent will use this to your advantage when negotiating.

Ways to Keep Insurance Costs Down

Some home insurers offer discounts on second homes, so ask your current home insurer what they can do for you. Several things can cut your insurance rate on a vacation home, such as a central alarm system and buying in a gated community.

Financing 

Lenders want to make sure that your debt does not exceed 40 percent of your gross income, but there are different financing options available for buying a vacation home. Also, talk to your tax professional about how a second home will impact your tax situation. The good news is that you can deduct up to a combined total of $1 million in mortgage interest on your primary and secondary homes.

While You’re Away

 

You’ll need to decide who will maintain the home while you’re away. Regardless of if you plan to rent your property or keep it for yourself, hiring a property manager will save you a lot of headaches. Yes, this will be an added expense, but a lot less than the damage from a leaky roof that had gone undetected or destruction after a break-in because your house looked uninhabited.

 

Whether you’re dreaming of whisking away to white-sandy beaches each winter or large family gatherings in upstate New York, there couldn’t be a better time to buy a second home. With today’s low interest rates and housing costs projected to rise, now is the time to make your dream a reality. Get ready for memorable summers, cozy winters, vacations, stay-cations, and everything in between. Welcome to your well-deserved home away from home.

By: Jim McKinley