If you are thinking about buying a vacation home, chances are you have already become really excited about the idea, making it hard to hear anything negative about the idea. However, if you are going to make this kind of a financial commitment, you need to understand that there are downsides to buying a vacation home as well.
Summer’s winding down, but you might be tempted to make it last forever. With the depressed real estate market, reduced risk of bidding wars and decent interest rates, you might think the time is right to finally take the plunge and buy a vacation home.
But have you considered what else the purchase might do to your lifestyle? Real estate agents will find lots of reasons that you should buy a vacation home.
But consider these reasons why you shouldn’t. First, it locks you into vacationing in one place for years.
This is one of the most taxing reasons, and the one that people seem to consider the least. The world is wide, and experiences beckon everywhere.
If you get tired of your one small corner of beach, lake shore or forest, that’s tough. Your financial stake will force you to return long after the magic might be gone, and your ongoing financial outlay may mean you will never get to see a dream destination such as Paris or Australia.
Some people don’t mind returning to the same spot every year. But even people who prefer consistency may change their preferences over time, or their family size may change, altering their tastes.
It’s one more expense. Paying for a second home dents a day-to-day operating budget.
You will essentially have to double everything you pay now — mortgage, tax, water bill, fuel bill, and so on. Before you sink your surplus cash into a second property, make a list of the things you could use that money for back home.
You may be paying off debt, saving for a college fund, or making Improvements on your primary home-this is something to consider. If you don’t have true disposable income, or if your employment future is murky, you should think hard about chaining yourself to the expense of a second home.
Maintaining a seasonal property can be fraught with trouble. Vacation properties frequently go empty for weeks and months at a time, so the potential for undetected disasters — leaks, burst pipes, mold — is higher than in homes that are occupied year-round.
That is where managing agents step in, but remember that you have to pay them, too. There’s no guaranteeing rentals.
It is true that renting a vacation home for a week or a month at a time can often net higher-than-market rates than an equivalent property that is leased on an annual basis. In fact, it is not uncommon to make back your year’s mortgage with about 12 weeks of rentals, especially if those fall in peak season.
But it’s also true that many holiday markets are soft, prone to suffering the exaggerated effects of economic downturns, and generally unreliable. When people don’t have much money, they don’t vacation and they don’t rent your vacation home.
Therefore, you may not be able to get a renter when you’re not there. Can you afford to float your second place in lean times?
If you’re buying real estate with the expectation of ongoing rental income, look at permanently residential areas first. You can currently expect less-than-optimal resale value.
Tom Selwick has worked in the vacation industry for the past 18 years and written hundreds of articles about travelling and lodging. He recommends (http://www.brightonchalets.com) for your lodging in Utah.
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