The opportunity and ability to buy a vacation home is an incredibly exciting event. Whether you plan to keep it for yourself or rent it out to others, it is important to remember that there will be quite a bit of effort involved in keeping the home secure and safe throughout the year. Here are some classic mistakes you’ll want to avoid.
This is perhaps even more important with a vacation home than it is with your primary home. Make sure you’ve considered not only your new mortgage payment and the cost of insurance, but the cost of utilities, landscaping and maintenance for when you aren’t around to do things on your own, and added security. If you’re purchasing a vacation home to rent to others, you’ll also need to budget for cleaning services and emergency repairs if there are problems while you have tenants.
A lot of people qualify for a mortgage, find a house, and then go out and start buying furniture for their new vacation home – usually on credit. Furnishing an entire home from top to bottom is expensive and doing so on credit will alter your debt to income ratio, which could mess up your chances of actually getting that mortgage. Wait until after you’ve purchased the home or, better yet, try to find a home that is being sold furnished or partially furnished, so you won’t have to rush and buy all new furniture at the same time.
Let’s say you’re purchasing an ocean-front property and plan on renting it out during the times you aren’t using it. There is a LOT of competition when it comes to shore rentals, so you’ll want to make sure your in-house amenities are as modern as possible. Not keeping up with modern trends will give you a distinct disadvantage when it comes to the competition and pricing.
A lot of people grossly underestimate their insurance costs when purchasing a vacation home. If you are purchasing a home that you do not plan to rent to others, you can expect to pay a higher annual premium considering the time your home will be unoccupied and exposed to damage, theft, or vandalism. An ocean-front home purchase will mean an additional flood insurance purchase, which can be costly. If you plan on renting your home, you will need to talk to your insurance agent about how to best insure the home, the business implications, and your liability risks when others are occupying the home.
Purchasing a vacation home may prove to be a great investment. Just make sure you’re planning appropriately – especially for the added financial strains at the time of purchase. Talk to your insurance agent, before you buy, for help putting together the best package possible to protect your investment.