Maybe you visited Malibu on vacation, got all starry–eyed, and then decided to refinance your home to get…a second one. For all the relaxation and comfort they afford, vacation homes shouldn’t be a spur-of-the-moment purchase. Buyers don’t need to sacrifice fantasy for reality, but they should know what to look for when deciding where to hang their hats for the other half of the year. Here’s a few questions to ask yourself when considering a location for your vacation home.
Is it easy to get to?
Surprisingly, the majority of people who own a vacation home don’t venture far from their hometown. According to recent studies, more than three-fourths of buyers purchase a second property that’s a short car ride from their house. This is an important consideration if you plan to rent your second residence during off-season, as being close allows you to address any unforeseen maintenance issues. Proximity also ensures that you can easily reach your vacation hideaway for a quick weekend hiatus after a stressful workweek, and well into retirement.
Be sure not to get too far off the beaten path; more vacationers will want to rent your space if you’re closer to a big city.
What do you like about the area?
Take some time to get to know your neighbors. They can provide some insider tips about which neighborhoods to check out, which restaurants to try, and how to avoid tourist traps.
Much of this part is a matter of taste. Social butterflies might look for a place that’s within walking distance of popular nightclubs, whereas outdoor enthusiasts should snag a piece of real estate near places to hike, mountain bike or ski.
A savvy real estate agent will point you in the right direction, based on your personal interests and financial needs.
How will it impact your finances?
This is one of the biggest considerations homeowners face when looking at second residences, especially if they still have a mortgage on their first home. It’s not uncommon for companies to charge increased rates for a vacation property, so make sure you consult a mortgage broker to help weigh all your options.
Taxes pose a particular challenge if you’re investing in a second house. Sure, taxpayers can claim deductions and write off the interest on a vacation address, but only if they aren’t renting out the property.
If renters occupy the unit for more than 14 days each year, you’ll have to include that rental income when you file taxes come April.
A second home can be a financial investment, but also an investment in your personal future. With proper maintenance, buyers can maintain — and even increase — the resale value, depending on the market, all while creating lasting memories in the meantime.