Many homeowners dream of owning another home. Whether this vacation home is near the ocean or in the mountains, owning another home is a popular goal. To decide if it's a smart move, we look at both the pros and cons of owning a vacation home. (To learn more, see How To Afford A Second Home.)
TUTORIAL: Buying A Home
The Pros of Purchasing a Vacation Home
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The most obvious benefit of owning a second home is always having a place to take a vacation. You won't have any worries about being able to book hotel rooms during peak seasons. This isn't even mentioning having room for additional family and friends. Having complete control over the furnishings and even design of the property permits the homeowner to create the perfect environment for his or her needs.
Another great reason to own a vacation home is the potential for additional income. Obviously, most will not be staying year-round in the vacation home, therefore these unused times can be rented out to vacationers to generate additional income. This income can be used to pay the mortgage on the second home, pay off other expenses or diverted toward savings. Although it is unlikely that the vacation home will pay for itself via part-time rentals, this income may greatly reduce the overall cost of ownership. Pay a visit to several real estate agents in the chosen area to determine what you could expect in terms of rents and occupancy over the year.
Of course, remember to think reasonably and with the primary location attraction in mind. For example, a home at a ski resort will most likely be easier to rent during the winter months. A home on the beach in the northern climates will be easier to rent during the summer. There are often property management companies in popular vacation home areas that will locate and screen tenants for your vacation home. Taking advantage of their services is a must if one wishes to rent out a vacation home.
Potential appreciation is another huge benefit of owning a vacation home. Making certain not to overpay for the property is key. It is easy to let emotion get control when making decisions for buying second homes. It is critical that the vacation home is viewed as an investment prior to purchase to maximize the potential appreciation. Just like in all other real estate, location is the key for increasing the odds of appreciation.
The Cons of Purchasing a Vacation Home
The primary con of owning a vacation home is additional expenses. Owning a second home instead of renting can be an expensive proposition. Everything that breaks or needs repair must be paid for by the owner. Property taxes, routine maintenance, insurance and utilities are but a few of the additional costs created by owning another home. While renting out the home can cover many of these costs, it can also create costs if the tenants are not properly screened.
Limited Vacation Locations
The next and seldom-considered con, particularly prior to purchase, is being stuck in one location to vacation. Even if it's a loved place, spending vacations year after year in the same location can become boring or routine. Although this con can be easily overcome by renting out the vacation home on a yearly basis, it is critical to consider.
The Bottom Line
There are many pros and cons of owning a vacation home. Before you make any purchase, be sure to do your research to see if the property will be the right fit for your needs.