A growing number of Americans are interested in buying vacation homes. Sales of vacation properties rose strongly last year, according to the National Association of Realtors. Buyers bought 717,000 vacation properties in 2013, which represents a nearly 30% boost in sales. According to the survey, the average buyers are 43 years old and they purchase get-away properties about 180 miles from their residences. Eighty seven percent of buyers wanted to use their properties for vacations or for family retreats, 28% sunk money into vacation properties to diversify their investments and 23% intended to rent their places. If you are interested in possibly buying a vacation home, here are five things you need to keep in mind:
You need to look at more than just the price tag of a vacation spot. Second homes can be expensive luxuries that require insurance, maintenance, property taxes, utilities and furnishings. If the property is located near a beach or in mountains, maintenance costs could be higher than expected. A house close to a beach may need to be painted more frequently and residences in the mountains may require more repairs due to inclement weather. Also keep in mind that financing a vacation spot will probably be more expensive than your primary residence. If you need to rent your place to cover your expenses, look at popular destinations where there is a strong demand for short-term rentals. If an outside firm manages the property as a rental, that cost could end up consuming 20% to 50% of the rental income. Beyond the financial commitment, don’t underestimate the amount of time you will have to devote to mundane issues such as finding a plumber to fix a toilet or shopping for homeowner’s insurance.
Your dream property might be located in a gorgeous area in the summer or spring, but what it’s like the rest of the year? For instance, do the roads near the property close during the winter months? Is the area prone to wild fires, flooding, hurricanes or tornadoes? Does the nearby lake become stagnant and smelly parts of the year? One investor, who hastily bought a waterfront vacation home in Miami, discovered after the purchase that the dock would not accommodate his yacht.
You obviously want to relax on vacation, but your neighbors could make that impossible. Several years ago, Paul Sullivan, a New York Times reporter, shared his experience as the owner of a vacation condo in Naples, Florida. He lamented about one of his neighbors whom he called a “condo commando” was a busybody who would frequently complain to the condo board about the residents and make them miserable.
It’s risky to buy a property because you think it’s hot and will appreciate in the near term. It’s best to buy a house or condo that you expect to hold onto for years.
Owning a vacation home can be tricky enough without making the lifestyle choice even more difficult by buying in a foreign country. For instance, in Mexico, you can buy a house, but you can only lease the land underneath it from the government.
Before making a commitment, weigh the pros and cons of owning a vacation get-away. And then ask yourself this question: Would you be better off just staying in a hotel?