3 Tips for Purchasing a Vacation Home, and How to Make the Most of it.
You’ve probably heard on the news how vacation home sales are reaching new heights. The economy is recovering, mortgage interest rates are low, and lenders are easing up their standards for approving loans. The National Association of Realtors had even reported that the vacation home sales increased by 10 percent from 2011 to 2012. So it’s easy to see buying, or renting, second homes in other states, or countries, is in high demand.
If you’ve been thinking about buying a vacation home you’ve had the deepest emotional connection with, now is probably the right time to do it. But if you don’t know where to start, begin with these 3 useful tips:
Schedule a trip to the property site
Old wisdom will tell you the most important factor to take in mind before buying a real estate property is: location. Drive to where the property is located, and get to know the neighborhood, to see if the amenities, and the environment, fit the bill.
Retirees often want a place they can call paradise, so identify if those paradise-like characteristics are truly possessed by your target property. You can only do so by making personal visits to the area. If the property didn’t meet your requirements, you can check out these homes for sale on McGrath.com, especially if you plan on owning a second home in Australia.
Scale the potential of the property to create investment returns
Being a vacation home, you will most likely stay there seasonally. You might then want to rent it out to other people so you can make something out of it while you’re away. Others use this kind of strategy to help them pay off the loan, and earn some passive income, at the same time.
If you’re going to rent out the property to pay down the loan, you must identify the possible break-even point first. You can calculate this by knowing how many weeks out of 12 months you have to have the property rented, and the total property cost, annually. Sum it all up, and divide it by the weekly rental rate you’re going to require from a holiday renter. The result will give you an idea on the number of weeks you’ll have to make the vacation home available for rent. Consequently, the profits should be enough to pay for the property’s repayments.
Aside from that, owning a vacation home could give you tax benefits. In the US, the IRS states that a vacation home owner should stay in the property for over 14 days within the year in order to qualify for a tax break.
Identify all of the costs involved
Buying a second home for retirement is no different from the first time you bought your primary residence. It does involve the same costs such as mortgage rates, insurance, property taxes, and other application fees. You might also have to pay for the house’s maintenance costs yearly, plus the constant fluctuation of the interest rates throughout the life of the loan.
Some experts recommend cutting out management fees, if ever you decided to rent the vacation home out during certain weeks of the year. This will help you save up some money instead of paying a real estate marketer to find tenants for you. Alternatively, you can rely on promoting your property online through paid or free real estate listing sites.
Now, who’s ready to find their vacation home?