7 Things To Remember Before Buying a Vacation Home

Vacation homes are secondary properties used for recreational purposes. These houses are often in locations different from the owners’ primary residences. Some people buy vacation homes to have a place reserved for relaxation, retreats, holidays, and leisure activities.

A vacation home purchase isn’t simple because it’s an investment. If you’re a first-timer planning to buy one, there are many things you should consider and remember. In this post, you’ll learn what you must keep in mind before purchasing a vacation home.

1. Determine Your Vacation Home’s Purpose

The first step before buying a vacation home is to determine its purpose. Finding a vacation home can be time-consuming and a hassle when you don’t know your goals. If you don’t determine your vacation home’s purpose, the options can be underwhelming, rates are too expensive, or nothing is available to your liking.

Since a vacation home will be your secondary residence, decide how you will use this piece of property. Identify whether you’ll use it for hobbies, special occasions, or vacations. You may choose all these purposes, but selecting a priority can help you quickly find a second home suitable for your needs and your lifestyle.

You should also consider how frequently you’ll go to your vacation home. The frequency of your visits will determine whether you’ll require a property management service for maintenance and rentals.

2. Assess What You Can Afford

A vacation home is an investment. Although you have experience with your first property purchase, the costs of a vacation home can differ. So assessing what you can afford is essential.

When there’s a mortgage, it includes principal, tax, interest, and insurance expenses. A mortgage is a loan agreement that allows the lender to seize your property if you fail to repay the borrowed money with interest. 

Besides the monthly mortgage, vacation home ownership comes with maintenance, repair, furniture, and appliance costs. You should also factor in property management and vacancy costs if you want to start a vacation rental business.

3. Consider Your Financing Options

If you don’t want to repay loans, saving up money is ideal. However, it can take too long, and other financing options exist, such as second-home mortgages, asset-based loans, hard money loans, cash-out refinance, and private lenders.

It’s best to obtain second-home mortgages from traditional lenders. They typically require a 20 percent downpayment, proof of income, and credit history. They may also lower their interest rates and offer financing for long-term investments. You can use a mortgage calculator to see your potential mortgage costs before applying.

An asset-based loan is an agreement secured by collateral. It uses your investment property’s equity or actual value to secure the loan. However, asset-based loans often have high-interest rates and short repayment terms, which are unsuitable for long-term investments.

Hard money loans are similar to asset-based loans. The only difference is that asset-based loans rarely use real estate as collateral, while hard money loans mostly do. 

A cash-out refinance takes out a new mortgage from your existing one and is given to you in cash. It is a popular choice in real estate because you can lower your mortgage payments and negotiate for lower interest rates.

Meanwhile, private lenders are those willing to invest in a vacation rental with you. They could be loved ones, investors, or other people you have significant relationships with. They often lend their money to investors and don’t require perfect credit scores.

4. Research Everything About the Location

Location is essential for your vacation home. Besides your preference, you must research everything about it, including crime rates, safety, business, and nearby restaurants and hospitals. Whether your vacation home sits by the beach, in the mountains, or a downtown area, researching its location will give you peace of mind.

Searching for crime rates can give you insights into how safe you will be during your visits. It can also ensure your property’s security when it’s unoccupied. Pinpoint nearby restaurants, markets, and hospitals that will provide easy access to food and medical help in emergencies.

Location will also be significant when you apply for vacation home insurance. Traveling to the location is the best way to get accustomed to the area. You should also include house tours in this itinerary.

5. Prepare Yourself for More Responsibilities

Some second-home buyers may only think of the benefits vacation homes can provide. They tend to forget the hassle and high costs that second-home ownership can incur.

Second-home ownership isn’t just about staycations and having fun. You should prepare yourself for the additional responsibilities it will bring. These responsibilities involve financial and time commitments. While you can outsource property management, maintenance costs are still in your hands. These expenses may even increase if you rent out your property.

6. Evaluate the Pros and Cons

Vacation homes have their fair share of positives and negatives. Even if you’re set on making a purchase, you should evaluate the pros and cons thoroughly.

Some pros of having a vacation home include extra income from rentals, long-term investment, cost-efficient vacations, and tax benefits. It may also be an ideal place to retire.

However, the cons can be costly maintenance, unexpected costs, time and effort, and high downpayment. The costly maintenance may increase if your vacation home is available for rentals. Can you afford and commit to these responsibilities while enjoying the benefits? Think twice before confirming your purchase.

7. Work With a Real Estate Agent Specializing in Vacation Homes

As a first-time vacation home buyer, your knowledge and expertise can be limited. You need expert guidance to ensure your purchase will be worth it. For these reasons, you should work with a real estate professional specializing in vacation homes and second-home ownership.

A real estate agent will help you shop for options and prepare the necessary documents. They will also inform you about local regulations and restrictions to ensure your vacation home purchase is legal and authorized.

Know Your Priorities Before a Vacation Home Purchase

A vacation home purchase isn’t simple. This decision shouldn’t be impulsive and careless. Since you’re making a significant investment, it’s essential to know your priorities by remembering these things before you confirm your second-home ownership. This way, you can prioritize your needs and get your dream vacation home without worrying.


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