If you want a permanent inroad to your favorite place to visit, purchasing a vacation home can be extraordinarily rewarding. And you’re far from alone: 21% of all residential transactions in 2014 were for vacation homes, according to the National Association of Realtors. But it’s a huge investment, and not one to be made with any less diligence than any other home purchase. Before signing the paperwork, do ample research into the local area and what owning a second property could mean for you even while you’re at your full-time home.
Taxes: Even if you’re only in your vacation home for a portion of the year, you still have to pay a full year’s worth of property taxes, so it’s important that you’re familiar with the tax code. Some tourism-heavy areas and beach towns will have differing rates for residents and nonresidents, sometimes requiring nonresidents to pay double the rate. Also, if you plan on renting out the home when you’re not around, you’ll be paying taxes on that rental income.
Maintenance Costs: Your vacation home will require regular maintenance, and since you won’t always be around to mow the lawn or clean the pool, that might mean hiring a person or a service to do it for you. Depending on where your vacation home is, you might also need to install a few smart devices that will allow you to control the temperature from afar (such as to keep pipes from freezing) or the lights (to ward off potential burglars). Consider the impact of these electricity and gas bills (in addition to trash pickup and water) in your monthly budget.
Insurance: Insuring your vacation home isn’t just like insuring your full-time home, and that’s a good thing. You can often find tailored policies to cover your home from events like fire, explosions, or hail, or just get enough coverage to reimburse your invested cash. The important part is that you have insurance, because you won’t be there to extinguish a lightning-caused fire. You might not even know something has gone wrong until well after the damage is done.
Short-Term Rentals: Many people looking to purchase a vacation home hope to rent out the property to recoup some investment. If this is a part of your plan, research what similar rentals in the neighborhood are going for and how often they’re booked. Plan on visiting after your guests check out to look for damage and clean up messes. Do you plan to handle this yourself, or hire a vacation rental management company. If it’s the latter, plan on allocating a portion of your earnings to them for their hard work on your behalf. Also be sure to check local policies and regulations regarding short-term rentals to see what’s required of you as a property manager.
Buying a vacation home is much like a typical home purchase — with many of the same monthly and annual costs and time investments. But if you make a plan and a budget to ensure the home is affordable and taken care of, it can be a great way to guarantee frequent visits to your favorite place to be. Also by partnering with a knowledgeable real estate company this process can become much easier.
Sam Radbil is a contributing member of the marketing and communications team at ABODO, an online apartment marketplace. ABODO was founded in 2013 in Madison, Wisconsin. And in just three years, the company has grown to more than 30 employees, raised over $8M in outside funding and helps more than half a million renters find a new home each month.