On the surface, purchasing a vacation home may seem pretty straightforward — find a place, buy it, and start living your best vacation life. But in reality, your dream vacation home can become a burden if you’re not careful. To help you determine if buying a vacation home is right for you, let’s take a look at some things you’ll need to consider before making the investment.
Think carefully before taking out a loan to fund your vacation home dreams. Is it a sound investment? If you lost your job, could you fund two homes? Will it be a financial burden in retirement? Ensuring your finances can withstand the additional costs of buying a vacation home is necessary to your financial peace of mind.
When running the numbers, don’t forget to budget for property taxes and other municipal taxes or fees you may be subjected to, are included. Driven primarily by location, the amount people pay for property taxes on secondary properties can vary wildly.
New Jersey, Connecticut, and New York have some of the highest property taxes in the country at over $5000 annually, with Mississippi, Arkansas, and Alabama coming in at the low end, each with less than $1000 annually. (1) Property taxes are also something that can increase over time, which is of particular concern in “up and coming” areas.
While it’s easy to get excited thinking about all the downtime you’ll have, the reality of homeownership is that maintenance will be ongoing.
The level of maintenance required will vary depending on the type of home you buy. For example, buying a beachside condo means a property manager will handle much of the maintenance, which probably comes at the cost of high HOA or condo fees.
If a remote lakeside cabin is more your speed, then maintenance and property upkeep will be your responsibility. If a tree falls on the property, you’re on the hook for dealing with it. Depending on the location, you may need to handle tasks such as hurricane-proofing or winterizing the property.
Before you buy, set a maintenance budget you can realistically afford and consider the time and effort you’ll need to invest.
The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual.