If you’re thinking about buying a vacation home, be it on the beach, by the lake, or in the mountains, before you pay the down payment, here are a few questions you should answer.
1. What are your goals?
Is the home you’re thinking about buying going to be just a vacation home or do you have plans to retire there or use it to generate investment income? You might even want to use it for all three purposes. Whatever your ideas are, carefully consider the location, size, and features. Most importantly, make sure all of the expenses fit your budget.
2. Is it in an optimal location?
A good location depends on many factors such as weather and available amenities. You want an area that’s close enough for you to access quickly, depending on how often you plan to visit. Always familiarize yourself with various aspects of the neighborhood, including the people, to ensure it’s a good fit for you.
3. What are the area’s risks?
Identify risks associated with having a vacation home in the area you’re considering and take the necessary precautionary measures. Examples of risk related to various regions include potential disasters (e.g., flooding) and high crime rates. Even the most beautiful places can have negative attributes, which you can identify if you dig deep enough. Using a real estate agent is the most effective way to gauge these risks.
4. Can you manage the upkeep?
Until you retire to your second home (if you ever want to), you’ll spend most of your time in your primary residence. Take into account how you’re going to manage the vacation home when you’re not around. Considerations to make include property maintenance, security, and tenant management.
5. What will be the home’s resale value?
Take into account how the value of the home will change over time. You want to buy a vacation in an area where property values rise steadily with time. Research the trends in home sale prices and find out if there are new or planned constructions in the area.
6. Can you afford the insurance?
It’s crucial that you get Seasonal and Vacation Home Insurance to cover your vacation home as well as all the related liability risks. Distinct from standard homeowners insurance, vacation home insurance covers:
Comprehensive property coverage
Liability coverage
Named peril coverage (fires, wind, hail, and lightning)
Agreed loss settlement (the value of your home less any deductible)
Actual cash value (the cost to replace/repair your property, based on its current condition, age, and value.)
