Tips for Buying Your First Vacation Home
Have you reached the point where you are seriously considering buying the second home you’ve always dreamed of? Whether you desire of a luxury villa in Italy, a coastal getaway, or a ski resort lodge to share with family, your first purchase of a second home is something to consider carefully.
Even with a steadily growing economy and relatively strong real estate market, you still must consider what you are trying to get out of a second home to know if it is right for you right now.
The first step in making your getaway home a reality is understanding your goals and needs. Here are some key points to consider:
What’s your motivation?
There are the familiar reasons for buying a second home — wanting a place to share with family and friends, or locking in a retirement home. Some people even look to special vacation homes as family heirlooms to be passed down through the generations.
Understanding what’s motivating the purchase will help you make the decisions on what you want.
Knowing what you want
Getting to the bottom of what you really need may take some thought. Down deep, are you a nester or an explorer? Would your family visit no matter if the home was on the ocean or across it? Younger children may love spending time at the secluded summer place, while teenagers and young adults might be less inclined to leave their cadre of friends.
The basics — house vs. condo
Different types of homes bring different costs and demands. When thinking about a house versus a condo consider maintenance, like yard work or snow removal. If you think you’ll use your second home only occasionally and don’t want to fuss with maintenance or worry about security, a condo may be your better choice if it fits with the reasons motivating you to purchase the second home.
It’s hardly earth-shattering news, but location matters. However, it matters in more ways than you may have thought of.
Of course, location is important if you’re thinking about resale value down the road or intend to rent out your second home. But have you considered the impact on your intended use? A close second home, a “weekender,” can save you the hassle of packing everything your family needs — or hauling your bulky ski, fishing or golf gear — every time you visit. While something further away may feel more like a getaway, you may feel more obligated to visit your special spot, potentially limiting your freedom to enjoy new destinations.
“That’s when clients can really feel like they’re prisoners to the home,” explains Sandi Bragar, director of wealth planning at Aspiriant. “If heading to the Santa Cruz beach house requires less travel, costs, and/or hassle than a Hawaiian beach house, it may get more use on weekends, which leaves room to still fly the family to Europe to explore new places. On the other hand, if visiting the vacation home requires long, expensive flights, you may feel obligated to fly everyone to Hawaii every year instead of exploring new areas.”
Second homes in international locales can hold special appeal. While purchasing a second home abroad can be a little more challenging, it can be rewarding both culturally and financially. For example, you can buy a house on the beach in El Salvador or a villa in Tuscany for a fraction of what it would cost on the New Jersey shore.
While the value may be greater in an international location, there are other factors to consider, like security, local property laws, political stability, and the currency exchange rate. And don’t forget access to health care especially if you’re considering it for a retirement home.
Try before you buy
If you are thinking about buying in a place you haven’t been visiting regularly, there is good reason to test out the region first. Consider renting for a season or two to help you evaluate the area, meet local residents discover some valuable pros and cons — like seasonal weather and tourism patterns that might affect your experience.
Trying before buying is especially important if you are considering moving internationally, as there are many more things you may not have thought of that would only occur once you are actually on the soil.
Sleep on it
Fresh from the pleasures of a tropical vacation it may be tempting to purchase a home before you return to the mainland. But decisions made in an elated moment may eventually be disappointing. “Do the research first to make sure the idea makes sense from a bigger picture view of what you’re trying to accomplish in your life and within financial plan,” Sandi says.
Talk to the experts
Whether you’re looking for a home for vacation or retirement, talk with experts who can help you understand the implications of your decision and execute it.
A financial advisor can help you determine how the purchase fits within your plan to reach your long-term goals, and they can help you organize all the attendant considerations (e.g., taxes, insurance, title, cash flow, etc).
Purchasing a second home is a major decision, one that should be made with both emotion and logic. Once you’ve done your homework and closed a solid deal, you can just pack the sunscreen and enjoy. Embarking down this path with a trusted financial advisor can help make the process a whole lot easier.