Finding The Perfect Vacation Home

Start With The Basics

Define your goals: Why do you want a second house? Is it for vacation or retirement, or is it a financial investment? Determining this will help point you in the right direction for the location, price and type of second home you ultimately purchase.

Be Careful 

Before you invest in a second home, consider the location, pricing trends and the time horizon for your gain. A lot of people take equity out of their current home to make a down payment on a second house. That's fine if the market continues to rise, but if it flattens or falls, you can get into big trouble in a hurry.

Many lenders require buyers to put down at least 20% on a second home, and some require 25% or more. Renting out a vacation home is a good way to cover some of the cost, but lenders often factor in a 25% vacancy rate when determining your qualification for the loan. The lesson is clear: Don't be overly optimistic on rental income--and you're nuts if you think the vacation home will pay for itself immediately and in perpetuity.

A vacation home can be just about self-sustaining, but it takes careful planning and hard work. You shouldn't buy a second home on the assumption that it will pay for itself. If you plan to rent your vacation home, peg the rent 10% to 20% higher than your monthly mortgage payment in order to cover costs. For starters, you'll have to hire someone to maintain the property in your absence, and unexpected repairs are a given. Keep in mind that renting your property immediately puts you in conflict with the calendar: The most lucrative times to rent are the same times when you and your family will want to enjoy the getaway--summer and Christmas.

You'll also have to decide what type of property you want: a house or a condo. The beauty of a condo is that routine maintenance is included in the association fees, so you won't have to hire anyone to cut the grass or make routine repairs.

Call us today to help you plan your vacation home.