Whether you prefer sand or snow, make sure your vacation spot has long-term potential.
When you have just come home from an idyllic vacation, and you decide it is time to invest in a vacation property, be careful. While you may be excited about your new home away from home, don’t jump in too quickly; there are many things to consider when purchasing a vacation property. Treat your purchase like you would any other major financial investment, and do your research before signing on the dotted line.
1 Arrange Financing: If you don’t have the luxury of buying your property outright, the next best option is to obtain a second mortgage with a large initial cash deposit. This way you will lower your interest rate; saving you money in the future. Otherwise consider taking a mortgage against your first home, but beware; interest on the second mortgage may not be deductible: Consult your lender or financial adviser. Be sure to take into account potential rental income from the property when calculating repayments.
2 Consult your Tax Specialist with regard to the tax implications of purchasing a second property. Property taxes vary from state to state, and if taxes are excessively high, you may end up with a property that is more of a liability than a valuable asset.
3 Check Accessibility of the area. If you are looking at a vacation property interstate, make sure there is a large airport nearby that is served by multiple carriers. If you decide to keep your vacation within driving distance, you are more likely to get more use out of it, and you will keep your travel costs down at the same time.
4 Research your area of choice. Areas that are already heavily developed, provide little room for value growth in the future, and may not be the best investment. Consider locations which are situated near to amenities and popular sights, but are set a short distance away from the action. A vacation property in this type of location will cost less, while still retaining high rental value.
5 Take a Vacation in your proposed property location, to test the waters. Check out the local sights and attractions, but also consider how the area could become your home away from home. This may sound like an expensive step in the process; however, purchasing a vacation home could be a costly mistake if you decide that the location isn’t right for you.