| Owning a vacation home is more affordable now | | | | times to rent are the same times when you and |
| than it has been in years. It is not longer the | | | | your family will want to enjoy the getaway. If |
| impossible dream, but there are basic steps that | | | | you use it a lot in high season and for all the |
| must be taken to prevent the dream from | | | | holidays expect a substantial reduction in income. |
| becoming a financial burden. | | | | |
| Estimate all the costs like insurance, utilities, HOA | | | | Here are some things to consider before buying |
| dues, maintenance and any needed repairs or | | | | your vacation home: |
| upgrades before you close the deal. Don't forget | | | | Answer the following questions - Why do you |
| you will have to lay out some cash to furnish it. If | | | | want a second house? Is it for vacation or |
| buying your vacation cabin is a stretch, it may | | | | retirement, or is it a financial investment? How |
| take away some of the fun of your getaway. | | | | much do you expect to use it? How much can |
| And don't count on rental income to cover the | | | | you comfortably afford? Thinking it through |
| entire cost of your vacation home. Rental income | | | | carefully will help point you in the right direction for |
| may offset some of your expenses but you | | | | the location, price and type of second home you |
| should be able to afford it without rental income.. | | | | ultimately purchase. |
| Before you invest in a vacation property, consider | | | | You will need to organize your finances - This is a |
| the location, proximity to home, pricing trends and | | | | big investment, so check your credit report, get |
| the expected return on the investment. Many | | | | all your loan documents and insurance information |
| buyers take equity out of their current home to | | | | together before you contact a realtor and start |
| make a down payment on a second house. That's | | | | looking for a house in the area of your dreams. |
| fine if the market continues to appreciate, but if it | | | | Pre-qualifying for a loan will make your search |
| flattens or falls, you can get into big trouble in a | | | | easier. |
| hurry, as many investors found out over the past | | | | Check out several areas to see how each |
| couple years.. | | | | matches your wish list for recreational activities, |
| Many lenders require buyers to put down at least | | | | such as golf, arts and culture, dining, swimming, |
| 20% on a second home, and some require 25% | | | | boating, hunting, fishing and hiking. Compare costs |
| or more. Renting out a vacation home is a good | | | | and make several scouting trips to promising |
| way to cover some of the cost, but short term | | | | regions. |
| vacation rentals can be difficult for the lenders to | | | | Location, Location, Location – This seems |
| accurately predict cash flow. | | | | obvious but you want a vacation home that's |
| The lesson is clear: Be conservative in estimating | | | | convenient to your primary residence, but still far |
| rental income--and don't expect your vacation | | | | enough away to create a sense of escape. The |
| home will pay for itself immediately and in | | | | easier it is to get to the more you will use it. |
| perpetuity. A vacation rental home can offset a | | | | Calculate how much time you and your family plan |
| lot of the expenses, but it takes a good | | | | to spend at your vacation home. Then decide |
| management company that you really trust. You | | | | how important rental income may be for you to |
| should never buy a second home on the | | | | comfortably afford it. Can you be flexible enough |
| assumption that it will pay for itself. | | | | to use it when it is not rented, or will you need to |
| If you plan to rent your vacation home, keep in | | | | block dates in advance? If the vacation house of |
| mind that renting your property puts you in | | | | your dreams is a stretch, you might consider |
| conflict with the calendar: The most lucrative | | | | something smaller or in a different area. |