Home sales increased during the pandemic spurred by low federal interest rates and economic stimulus checks from the government. While most Americans bought their first homes during the surge, some bought second homes outside of major urban areas in the country.
Sales of vacation homes were even higher compared to the year before. Sales from July to September 2020 were 44 percent higher compared to the same period in 2019. The work-from-home and online learning arrangements may have also encouraged people to purchase their second homes.
If you are planning to do the same, you should take into account several factors.
Location of the Vacation Home
You should consider the location of the vacation home. While it’s a great idea to have a place to stay in Florida, you may want to think it through if you have to go on a flight every so often to reach it. A good location for a vacation is around two hours away from your main home. At this distance, you’ll likely use it more than once a year.
Aside from its distance from your main home, you should also check if the area is prone to hurricanes, earthquakes, and other natural disasters. You can check with the US Federal Emergency Management Agency (FEMA) for flood-prone areas so you can avoid purchasing property there.
If you decide to make it your primary home, you should also check the cost of having long-distance movers ship your belongings to the new home. You should make sure that you have the extra funds to cover the cost.
Cost of the Second Home
Aside from the location, you should also consider the effect of a second mortgage on your financial status. If the second mortgage is not an issue, you should also check the other expenses related to owning a house. These expenses include property taxes, homeowners’ association fees, insurance, and maintenance cost.
If you buy property in a resort town, you should note that the cost will be higher than other locations. A good rule of thumb is to set aside at least one percent of the purchase price for the maintenance of the home.
Resale Value
Even as real estate is a safe investment, prices can also go down during a recession or disaster. The current pandemic may be one of the few exceptions to this rule since home prices increased as more people looked for houses to buy.
When you buy a house, you should also consider its resale value if you’ll sell it in the future. Aside from the location and status of the house, you can also perform renovations to enhance its appeal to potential buyers in the future. You can also increase its usable space and make it energy efficient.
Rental Income
You can also offer the vacation home as a rental if the community allows it. Rental income can cover the cost of maintaining the home. But you should make sure it catches the attention of potential tenants. So, you should consider the curb appeal of the second home you want to buy. This makes the property attractive to people looking for a place to stay in the area.
You should also equip the house with new appliances to increase its appeal in the market. Getting the services of a property management company to handle the property is also a good idea. But these are additional expenses that you should consider when you offer a second home for short-term rentals.
You should also consider the periods when the property goes unrented and the times when you stay in the property for a vacation with the family.
Personal Goals
You should also check if buying a vacation home can affect your personal goals. For instance, you should see its effect on your long-term finances, especially if you are still saving for retirement or college for your children. While making changes in your plans is not wrong, you should also make sure it does not affect your long-term goals.
If buying a second home does not contribute to achieving these goals, you may have to shelve the plan for the moment. You can always go back to it in the future when you saved up enough money to achieve your financial goals.
There may even be instances when you have to look for a smaller home to achieve your goals. So, it’s always a good idea to evaluate your plan of buying a second home and see how it affects your personal goals before going through with the plan.
Buying a second home is a major decision that people should evaluate thoroughly since it can affect their long-term financial goals.
