If vacation’s all you ever wanted, perhaps a vacation home would make it easier to find time to get away. Are vacation homes worth the expense? How is it different from buying a primary home? Let’s explore everything from how often you’ll use the house to how to finance it.
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Are you dreaming of summers at the beach? The rise of remote work makes spending the warm months by the ocean, your toes buried in the sand as you send emails from your laptop, more possible than ever before. Maybe you’d prefer somewhere cooler, like a mountain retreat next to a sparkling lake. You could spend your summers on a dock, watching the sailboats cruise past as you attend Zoom meetings. Perhaps a wooded hideaway is more your style, where you can peruse spreadsheets while sitting on your back porch with a cup of coffee, watching the wildlife stroll through your yard.
If you’re thinking about buying a vacation home, you’re not alone. Vacation home sales increased by more than 50 percent during the height of the pandemic, and while those numbers have fallen in recent months, they’re still much higher today than in years past.
Are Vacation Homes Worth It?
A vacation home sounds terrific, right? You’ll be able to stay as long as you want, you won’t have to spend money on hotels, and it’s a great investment. Plus, you could rent it out when you aren’t using it, making your vacation home a source of income. However, there are drawbacks. Here are a few to consider:
- Expense. One home is expensive to maintain, and your second home will need just as much attention. In addition to regular upkeep, there are big-ticket items like new roofing and HVAC systems to worry about. If your house is in a cold climate, freezing temperatures and snow could cause damage, which you’ll have to get repaired from a distance if you aren’t there. Conversely, if your property is on the east coast, tropical storms and hurricanes might impact your home. If the house is vacant for a large part of the year, you may need to hire a cleaning service or someone to look after your home. You might want to install a security system and possibly keyless entry if you’ll be renting it out to guests.
- You’ll have fewer travel options. Perhaps you enjoy going someplace different every chance you get. If you invest in a vacation property, it wouldn’t make sense to spend your money elsewhere. On the other hand, if there’s a place you love and you vacation there every chance you get, or you’re a creature of habit and the familiarity of returning to the same vacation spot year after year appeals to you, then a vacation home might be a great idea.
- You might not use your vacation home as much as you think you will. If your property is far from where you currently live, requiring a long car ride or a plane trip, you might only make it to your vacation home once a year. Even if it’s only a couple of hours from where you currently live, will you head there every weekend? Once a month? Twice a year? Life tends to get busy, so think about how much you’ll actually be able to get away.
- Renting out a vacation property can be complicated. While you might be able to rent out your vacation home, be sure you’re comfortable with this. Even if you’re fine with people being in your home when you aren’t there, you’ll encounter a variety of issues when renting out a vacation property. You’ll have to market your vacation rental, determine a fair price, accommodate your guests, and deal with a variety of issues and complaints from visitors. For example, if you have renters in your home and the air conditioner goes out, you’ll need to get it repaired as fast as possible. Unhappy vacationers might leave negative reviews for your property, which could impact your ability to rent it out if it happens too often.
How to Find an Affordable Vacation Home
Don’t buy a vacation home if it doesn’t fit comfortably within your current budget. If you buy a home thinking you can use the rental income to pay the mortgage, you could find yourself underwater if the home doesn’t rent out the way you expected.
There are different financing and tax requirements if you buy a home with the purpose of renting it out. An investment property might require a larger down payment and your interest rate might be higher than if it were your primary residence. Talk with your real estate agent and financial advisor about how you intend to use your vacation home and the best way to finance the property.
Beyond the mortgage for your vacation home, you’ll want to consider all the other expenses, such as utilities, landscaping, cleaning and upkeep, and property taxes. If you purchase a home in a community with a homeowner’s association, you may have an annual HOA fee.
Purchasing a vacation home will bring with it the same types of expenses you dealt with when buying your primary home. You’ll need a substantial down payment of about 20 percent and closing costs. Since this is a second home, you may also need to furnish it and stock it with everything you’ll need to be comfortable when you’re staying there: furniture, dishware, pots and pans, bedding, towels, pantry staples, televisions, kitchen appliances, etc.
How much you’ll spend also depends a lot on where you look. For example, a vacation home on Saint George Island, one of Florida’s more exclusive Gulf Coast destinations, could cost millions. However, if you look at houses in nearby Fort Walton Beach, you could score one for less than $200,000. If you prefer Florida’s east coast, Myrtle Beach is a very affordable location, with condos and houses starting around $200,000.
Unique Vacation Destinations
If you’re looking for something a bit different, a vacation destination off the beaten path may be more your style. Keep in mind that if you are planning to rent your home out to vacationers, you might want to stick to more popular locations. However, if you want a one-of-a-kind getaway destination, here are some fantastic (and often underrated) vacation spots:
- Kingfield, ME: Kingfield is wooded, peaceful, and close to one of the best skiing destinations in the US, Sugarloaf Resort. Kingfield is also very affordable, with homes starting around $220,000.
- Corpus Christi, TX: When you think about great beach towns, Corpus Christi probably doesn’t spring to mind. This works in your favor since oceanfront property is very affordable in this cozy Gulf location. In fact, you can find homes for less than $200,000.
- Oscoda, MI: Located on Lake Huron, Oscoda gives you the best of both worlds: a beachy shoreline and plenty of wintertime snow. This terrific little town has a variety of properties available, with some priced below $100,000.
- Chattanooga, TN: If mountain hiking, caves, and waterfalls are your thing, Chattanooga is one of the most affordable vacation destinations in the country. You can find a home for less than $300,000.
- Stroudsburg, PA: An adorable, historic community set in the Poconos, Stroudsburg oozes small-town charm. The Poconos have long been a great vacation destination, and you can get a house in Stroudsburg for about $300,000.
- Greybull, WY: Are you looking for solitude? A place where you can go horseback riding or hiking and rarely see another person? Wide-open spaces are all yours in Greybull, a tiny town of less than 2,000. Greybull is between Bighorn National Forest and Yellowstone National Park, giving you plenty of mountains and valleys to explore. Best of all, you can find a vacation home in Greybull for right around $200,000.
- Petersburg, AK: It might take a bit of extra effort to get there, but the island community of Petersburg has stunning mountain views, cozy fishing villages, and wildlife. Located on the Frederick Sound, you can watch humpback whales in the summer, take a boat trip to LeConte Glacier, or just sit and watch the boats cruise through the harbor. You can buy a house here for around $200,000.
- Ocean Springs, MS: Situated along the eastern shore of Biloxi Bay, Ocean Springs is an artsy little beach town with a long history, first settled in 1699. Spend your days at the beach, or head into town and enjoy the many restaurants, art galleries, and shops. A house in Ocean Springs averages about $200,000.
- Klamath Falls, OR: Near Crater Lake and not far from Mount Shasta and Lava Beds National Monument, Klamath Falls has something for everyone. From hiking and bird-watching to boating and fishing, Klamath Falls provides a variety of outdoor adventures. Homes in Klamath Falls average about $350,000.
- Fort Dodge, IA: A terrific location known for tubing along Lizard Creek, Fort Dodge is close to Brushy Creek State Recreational Area, Rosedale Rapids Aquatic Center, and Dolliver State Park. The average home price in Fort Dodge is about $130,000.
- Alamogordo, NM: If you love beautiful, white sand but aren’t really a fan of the ocean, Alamogordo is located near the White Sands National Monument. This park provides visitors with 275 square miles of white sand dunes made of gypsum, and it’s a spectacular sight. The park is ideal for hiking, camping, and bicycling. Alamogordo is also near the Sacramento Mountains, which offer even more hiking trails. Alamogordo is very affordable, with homes averaging about $150,000.
What to Consider When Buying a Vacation Home
Purchasing a vacation property, especially if you plan to rent it out, is much different than buying a primary residence. For example, the lender might require different financing than if you were buying a primary residence. Make sure you do thorough research and find a real estate agent in the area you are considering who can help you navigate all the obstacles you might encounter. Here are some things to consider as you look for vacation homes:
- Research the area carefully. If you want to use your home as a short-term rental property or if you plan to leave the home vacant for extended periods, discuss this with your real estate agent. It’s critical they understand the purpose of the home so they can steer you away from properties that won’t suit your needs. For example, if a community has an HOA, short-term rentals might not be allowed. There could also be local restrictions against vacation rentals in certain places. If you buy a home without realizing this, you could be stuck with a property you can’t rent out.
- Weigh the pros and cons of hiring a property manager. If your vacation home is some distance from your primary residence, it might be a good idea to hire a property manager. There’s a lot to deal with when you own a short-term rental property, from marketing the property to screening applicants to cleaning and maintaining the home between guests. A property manager can help you deal with all these things. While a property manager can save you time and give you peace of mind, this will cost you. Rates vary, but you can expect to pay anywhere from 10 to 30 percent of the rental income for a property manager.
- Location is key. If you plan to rent out your home, you want to be in a desirable location for vacationers. If, for example, you buy in a beach town but your home is miles from the shore, you may have more difficulty renting it out. If your home is in an area with spotty Wi-Fi, that could also impact its rentability. If you want to sell the property in the future, you want to buy in an area where value is increasing. Review area comps with your real estate agent and make sure the home has features that will be attractive to vacationers. For example, if it’s a drive to the beach, perhaps the home has a private swimming pool that visitors can enjoy.
- Visit first. Make sure you’re familiar with the area in which you are planning to buy. Take a vacation and spend some time there. Learn more about the area’s attractions, secret destinations, and entertainment venues. This will not only help you determine where to buy, but it will also help you when it comes to marketing your property if you rent it out.
- Stick to your budget. Plan your budget before you start looking at properties and don’t be swayed to go above that amount. When planning your budget, make sure you factor in all costs, not just the mortgage payment. For example, if the property is on a lake or river, you might need flood insurance. If it’s along the coast, you might need insurance that covers hurricanes. Set up an account to pay for unexpected expenses, such as items that break, go missing, or need updating.
Whether you rent in out or not, a vacation home is more than a getaway destination. It’s a place where you’ll create memories with loved ones, relax and recharge, and build relationships in a new community. Start your search for a vacation home today and soon you’ll be enjoying your very own seaside escape, mountain retreat, or wooded hideaway.