Recent statistics show that buying a vacation home or investment property continues to be a popular move for many Americans. The unpredictability of the housing market can make purchasing a vacation home a real gamble for retirees, but for those who approach it carefully and do their homework, it can be a profitable decision.
The right approach
When looking at a vacation property, it’s always important to take into account financial and geographical factors before jumping into the market. For example, if you’re considering a vacation home here in Breckenridge, keep in mind this city is regularly listed as a top ski area but offers more than just winter sports. People also flock to the area for its unbeatable hiking, festivals, and white water rafting. By positioning your vacation home for year-round use you can make it a more profitable source of income when you’re renting it out.
Location is the number one rule in real estate. That holds particularly true when purchasing a vacation home. If you plan to rent it out throughout the year, you need to think about where and how accessible it is. Many retirees want family members to be able to enjoy the fruits of their hard work and will purchase a place based on these criteria. Is airfare affordable if your family is traveling from farther across the country? Can they use a budget airline that flies to your vacation rental destination? Factor in travel time and costs and get a good feel for the area throughout the year. Is it safe and are there plenty of amenities nearby? The answers to these questions are critical when making your choice.
Financing and timing
Before making such a commitment, carefully examine your finances and whether you can handle the financial burden of a vacation home. How’s the housing market where you’re looking? Investigate the situation by talking to a local realtor who knows where to look for the best deals. Ideally, you should focus on areas with high appreciation rates. Remember, this is an investment as much as it is a place to kick back and relax.
If you’re taking out a mortgage, use a lender in the area where you’re buying, someone with expertise in the market and who can steer you away from potential problem areas and help you keep insurance costs down. Be aware that lenders typically charge less for single-family homes. If your savings and investment income are insufficient, consider tapping into a home equity line of credit from your primary residence, commonly known as a HELOC. Ultimately, you need to know whether you have enough time and money to commit to a vacation home.
This is a big issue for vacation homeowners. If you’re purchasing a vacation home along the Texas Gulf Coast and you live in New England, you’ll need someone to look after the property and to deal with problems that arise from time to time. This is key if you’re planning to generate income by renting the place. A lot of property management companies will take care of maintenance and upkeep and help you market the place. Ask potential managers how and where they’ll market your property, and how they create a professional-looking listing online and in print. Do they use professional photographers whose work will be posted on their website and in printed marketing materials? Most importantly, you need to know how available they are and how quickly you can expect them to respond to an emergency. This is an important issue if your home is in a flood zone/hurricane region.
Purchasing a vacation home can be the feather in your cap for all those years of hard work. If you go into this decision with a clear plan and an idea of what you can afford and how to make it work as an investment, there’s no reason you can’t be kicking back in a few months reveling in your retirement.
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