The current demand for vacation homes is sky-high, reports Mansion Global. Mortgage rates are low and more people are working remotely, which makes vacation homes an attractive investment-cum-living option. As a retiree, this is a good time to buy your dream vacation home. While, admittedly, demand is high and good properties hard to locate, house prices are only going to continue to climb in the future. The house you buy now will likely be worth significantly more a few years down the road.
In this mini-guide, Realtor Suzi Farajiani offers some advice on buying vacation homes for retirees:
Can you afford a vacation home?
Vacation homes are more than a one-time investment – they’re an ongoing one. You not only pay for buying the property, but also for maintaining it. The numbers quickly add up. Some expenses you will have to account for:
Taxes
Insurance
Moving-related costs
Maintenance
Management
Utilities
Deprecation
Losses
Before buying a home, double-check your finances. Can your budget support your lifestyle and the price of a new home? If you’re buying the vacation home solely for renting it out, calculate your cash flow. Investing in the stock market may net you better returns sometimes. Talk to a financial advisor before choosing.
Pinpoint your needs
Why are you buying a vacation home? Keep your needs at the forefront when finding a property:
Vacation stays: Will you be vacationing for at least a few weeks every year? The IRS treats rental vacation homes as investment properties if you stay there less than two weeks.
Primary or secondary residence: Will your vacation home, eventually, be your primary residence? Or will it be a true vacation home?
Amenities and opportunities: What nearby facilities do you and your family members need? Some considerations are healthcare, entertainment, education opportunities, employment, and socialization.
Consider the location and real-estate market
The location is important – would you like to live near the sea or somewhere inland? What activities do you like? You may enjoy fishing, gardening, hiking, or just visiting family and friends. Pick a location that best aligns with your lifestyle. Also, check the real estate market to ensure you’re making a sound investment. Realtor Suzi Farajiani can help you find your next investment property!
Generating a rental income
Renting your vacation home out when you’re not actively using it can help you offset your maintenance-and-mortgage-related costs – and sometimes even turn a profit. This approach has its pros and cons, reports Millionacres. The pros are you can make money, write off expenses, and have a retirement home. The cons are you have to manage the property, market it, pay more expenses, and expose yourself to risk. You can rent out your new vacation home online to potentially generate a steady, long-term income.
Protecting your vacation home if you rent
Protecting yourself from risk should be a priority. Looking into home warranty reviews is a good place to start. Compared to homeowners insurance that only covers damage to your home's structure, theft of belongings, and injuries that occur on your property, a home warranty includes coverage when home systems or appliances break down. This is an annual renewable contract that can cover breakdowns to your heating, cooling, electrical, and plumbing systems, along with covering appliance repairs. Choose a home warranty company that provides a policy that fits your needs and budget.
Forming an LLC can also help protect your vacation home; operating as an LLC means you’ll be treated as a vacation rental business owner. It protects your personal assets from litigation and also offers a handful of other perks. To create an LLC, you can hire a lawyer (expensive), file the paperwork yourself (free, yet time-consuming), or use a formation agency (affordable).
Make security a priority
Vacation homes – especially the ones not rented out – are a favorite target for thieves. Get your property insured as a precaution. Furthermore, consider installing cameras so you can keep an eye on your property. Some other suggestions are installing smart locks, smoke detectors, leak detectors, and high-tech security systems.
Hiring professionals to look after your home
You will have to dedicate time and energy to look after your vacation home. If you live far away, you may have to hire professionals to look after your home. Landscapers can maintain the garden and exterior. Cleaning services and handymen can look after the interior. If you’re renting it out, you can hire a property manager for marketing and tenant management.
Conclusion
Make sure you talk to a few vacation homeowners before you make a purchase. They should be able to give you first-hand advice on what you’re signing up for and what to expect. A little research now will help you make a financially-sound decision and net you a wonderful, “happily-ever-after” vacation home you’ll love.
Realtor Suzi Farajiani of Douglas Elliman Real Estate specializes in residential buying and selling with an emphasis on marketing properties as well as consulting for investing purposes. Team up with Suzi today! 805.630.3894
Article Submission by Julian Lane