Updated: Oct 19, 2020
Owning a vacation home can be quite exciting and offers some great perks. However, it also comes with various responsibilities. You will need to invest money, resources, and time into your second home. The decision of whether to own a vacation home or not is a serious one and requires careful financial consideration. Here are a few of the questions you should ask yourself before taking this financial responsibility.
Can I Afford It?
Owning a vacation home comes with responsibilities that go beyond the mortgage, insurance, down payment, and taxes. Create a budget to prevent you from overspending. You can also cash out a refinance on your primary residence. According to Bosse Loans, you should consider putting a 5% down-payment on your home so you can use the funds saved to buy your second home. You will need to set aside some maintenance funds to maintain and repair parts of the home, such as the yard and the pool. Unless you find an already furnished house, you will have to dig into your pockets to embellish your home. Keep in mind that you will also have to prepare for transport and entertainment expenses.
Should I Rent It Out?
Renting out your vacation can help you generate income and also eliminate some expenses. According to Mila Realty, there are plenty of benefits of renting out a home in a popular location, but make sure you do your homework first. The decision to rent your second home should be well thought through in advance. Some properties have covenants that prevent you from offering short-term rentals. You should check the bylaws if you intend to rent out your home. The weather and seasonality will also affect the amount of income you generate. Renting your home in the peak season will bring in more money for fewer nights. Research the events held in the area and focus on marketing your property well during the low season.
Is It Economically Prudent?
If you vacation in one place most of the time, owning a second home there may make sense financially. However, if you enjoy visiting different areas, a vacation home limits your options. The amount of time you will be able to spend there is also a vital factor, as is the viability of renting out the home as a business. Really look at your family’s vacation habits and determine if a vacation home will pay off.
Vacation homes are a great asset. However, they’re a big investment so you need to think carefully before making a decision. This way, you’ll be at peace and be able to enjoy your vacation home for years to come!
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