Buying Your First Vacation Home: All Your Questions Answered
With 1.13 million dollars spent on vacation homes in 2015, the number of Americans looking for a private, paradise getaway is soaring. More and more people are starting to vacation and investing in a second property is becoming a popular option for families. If you’re looking to join this growing list of investors, you probably have a lot of questions that you would like answered. So, to ease your pain and create a smooth transaction, check out some of the answers to the most common vacation home concerns.
Is it Worth it to Buy a Vacation Home?
Before deciding to embark on your next adventure, you’re most likely wondering if it’s worth it. However, a simple calculation can help you determine if a vacation home is worth buying. Financial advisors suggest that you should estimate the number of weeks that you’ll spend next year. Then, multiply this by the average weekly rental rate at your favorite travel destination. Is this number more or less than what you would spend on a second home? Although this is the basis of your analysis, you can also take into account how you’ll use your home. If you can and are willing to rent out your second property while you’re not using it, you can also add these incentives to the value of your purchase.
Can You Afford a Second Home?
If you think that you’d like to invest in a second home, the next step is to determine whether or not you can afford it. Real estate is not a liquid investment and you can’t immediately count on selling the home for profit. Therefore, you should really sit down and determine if you can afford the house in the first few years of your ownership. Determine your annual income and deduct your monthly debts. This will include credit card payments, student loans, retirement funds, current mortgages, and any other bills you pay. You should also consider the strength of your credit score as this will also affect your ability to purchase a new home. If these are in line and you have about three to six months of emergency funds, you can probably afford to buy a vacation home. Take 10 percent of the number that you received by deducting your debts from your annual income and use this number as a base of how much you can afford on your vacation home.
Where Should I Buy My Home?
Most people that buy a vacation home choose one that is on a beach. However, you can buy a home wherever you’d like. First, consider how far you want to travel for your trips. As a general rule, most investors say you shouldn’t pick a home that is more than a two to three-hour drive or flight from your primary house. This will give you the most use out of your home and make you feel as though you made a good investment. You should also choose a place that you’d like to visit often as well as a place that is touristy. This will allow you to make plenty of trips to your home without being bored and it will also give you a greater chance of selling it if there are many people visiting the area.
Buying a vacation home is a significant investment. Before you decide to embark on the adventure, be sure that you’ve looked at your finances and do your research.