When it comes to real estate investments, vacation homes can be a great option, both financially, and as a huge family asset. But if you’re considering buying a second home to use as a vacation spot, there are things you should consider – especially if you plan to rent the home out when you’re not staying in it yourself.
Like any investment, buying a vacation home can be risky. Location and current market conditions are extremely important when deciding whether to buy.
Below are 5 things to ask yourself before you start house shopping.
Will you be able to afford repairs, maintenance, insurance and utilities? Sure, maybe you can afford the monthly mortgage, but homes are costly investments, so make sure you think through every hidden cost.
What will you do with the property when you’re not in it? Will the house sit empty? Will you share it with family or friends? Will you rent it out on a rental website?
If you plan to rent out your vacation home, will you manage this business yourself or hire someone? If you plan to rent your home for more than 14 days a year, this is considered a business, and profits need to be reported to the IRS. Who will manage the ins and outs of your business?
Can you afford the fees to pay the manager or agent who manages this? If you plan to have someone manage your bookings and clean your home between guests, make sure you can afford to pay them a portion of the rental costs for these services.
What if you are unable to rent your second home? Can your pocketbook withstand the strain of paying the mortgage? Don’t just assume you will have a steady rental business from the get-go. It can take months to build up bookings, and rental demand will fluctuate throughout the season.
Recognized as a Recreation and Resort Specialist in beautiful Ocean City, MD for over 3 decades, I co-wrote the Recreation and Resort Specialist Certification. For more information about the RRS course, please call 443-523-0023. I look forward to hearing from you!