Vacation properties last year accounted for an impressive 13 percent of all house sales, the highest share since 2006. According to the National Association of Realtors, high net worth households whose equity market investments are finally coming good are leading the charge for recreational properties. With bargains to be had however, there is still time for the average family to seize the opportunity and access the vacation home market.
Whether you are purchasing a vacation home as a short term investment or intend to holiday there for the foreseeable future, there are three key issues to consider before you sign on the dotted line.
Set a budget and stick to itThe first step on your vacation home buying journey should be to set a budget for the project. This will inform decision making throughout the process and ensure you don’t over commit financially. The vacation home is something to be enjoyed, and should not end up like a monetary millstone around your neck.
If a mortgage is required, look into the options available for vacation homes. Products designed for these purchases can be difficult to access and often have higher interest rates attached. Deposits requirements can also be significant so budget for between 20-30% for non-owner occupied properties. On the upside, tax deductions may be available dependent on whether you plan to rent out the home or not.
Remember that it’s not only the purchase price which needs to be taken into account in the budget. Vacation homes need to be equipped and furnished. Opt for good quality items which will stand the test of time – you don’t want to spend future vacations searching for replacements. Also, do as Sofas and Sectionals suggest, and choose versatile furniture which maximizes the space available to give flexibility for when extra guests come to stay without the need for purchasing additional beds. In addition, make a budget for the running costs of the vacation property. Dolly Lenz, the ‘Queen of Real Estate,’ advises buyers to set aside around 2 percent annually of the property’s value to cover maintenance expenses.
Location, location, locationThere are a number of elements which will determine the right location for your perfect vacation home. Firstly decide how often you intend to use the property. If you plan to visit frequently then proximity to your main residence will be important. Research carried out by the National Association of Realtors indicates that over 80 percent of vacation home-buyers choose properties within driving distance of where they live. If the property is only for occasional use you can spread the search area somewhat wider. It’s still important to ensure that there are good travel links from your home to the vacation property and that these are cost effective.
When you have identified a specific area or areas to focus on it’s time to consider the physical location of the property within that zone. Do you prefer somewhere close to the beach or lake? Do you want to be near other residences and local amenities? Take time to research the neighborhoods which meet your requirements and which represent a sound long term investment.
Above all choose somewhere that you can like and can relax in. Dan Hechtkopf and Reid Heidenry of South Beach Investment Realty’s top tip for vacation property purchases is to view the home as a form of recreation, not an investment. In other words, choose somewhere that you enjoy.
It can be hard to find the perfect home, and the same is true of a vacation property. Getting everything you want at the right price can be a challenge, but one way around this is to undertake a remodeling project. If you manage to find a property which is in the right location and is the right price but perhaps lacks some of the charm or facilities that you require, assess its potential for some reworking.
Figure out what scale of work you are prepared to undertake. Fitting a new kitchen and/or bathroom is a quick way to update a vacation home, and is a sound investment in terms of adding value to the property. New flooring is another relatively inexpensive way of breathing new life into a vacation home. Adding extra storage facilities is also particularly useful in a vacation home as this saves on the amount of things you need to bring back and forth with you.
Bigger projects are also possible such as reconfiguring room layouts or even adding additional square footage. Identify contractors who have expertise in this area and seek their advice on what is viable with your particular property. A professional construction expert can be a real asset in terms of drawing up fully costed time bound plans which will give you a clear idea of what you may be taking on. They will discuss in detail what you need from the vacation home and respond to that brief. As Advanced House Plans, a company with particular expertise in home remodeling recognizes,
“The design of your next home should perfectly fit who you are and how you live.”
Making an investment in a vacation home does have some risk attached – just like any other investment. The big difference is that this is an investment you and your family can enjoy. So join the millions of Americans who are fueling this vacation home boom and buy into your future getaways.
Contributed by reader, Emma Bowden