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Vacation Home Anyone?

While on vacation to a favorite destination, you wouldn’t be alone if you’ve wondered what it might be like to own a property in said vacation-area. Thoughts of the home being a go-to for your own vacations in the future, additional income as a rental property for other would-be renters, and perhaps making the second property your primary residence in the future are common. Like a primary residence, a vacation home or secondary residence have their own unique set of considerations.

“Location, location, location” would still be a mantra to have in the back of your head when it comes to a secondary residence. Many who consider purchasing a vacation home have fallen in love with a particular area, and hold fond memories of vacations in the past that compel them to buy. It’s important to also consider the practical side of your investment, not just the emotional side. Just like in the purchase of a primary residence, considering the local area and market (and if you intend on renting out the property to others and their desirability to vacation there), are key. What is drawing you to a particular area? Is it ocean front? Lake front? Close to a popular attraction? A rural getaway? The things that you’re looking for when you’re booking your vacation are probably similar to what others would be looking for as well. Is it where you want to visit? If so, others probably would, too. The advice would be similar to a primary residence in that you’d want to drive the neighborhood at different times of the day/year to get a flavor for the area, not just when you’re vacationing.

Talk to the locals when considering a purchase. What do they like about an area? Are there any up and coming developments, and with those developments, additional services that might be going in that would change the flavor of your favorite destination? For instance, you love a cabin in the woods but little do you know that there’s a 300-unit condo complex going in over the next couple of years, along with a new shopping center to support those families. Your once beloved remote cabin may not be so remote after all. Knowing what the town’s plans are for the future development of an area, especially if you’re considering it as a retirement home, would be important.

In the area that you’re considering a purchase, is there a Home Owner’s Association (HOA) or any deed restrictions that you might need to consider? Get a copy of their bylaws, certainly. Are there any restrictions on renting out the property? If it’s on the ocean or a lake, is there beach rights or access? Some lakes and waterways don’t allow swimming or motorized boats; will that fit for your vision of time spent there in the future? One example of a deed restriction that we’ve run into is that there was no parking of large vehicles in the neighborhood. So, a family that has purchased a nice lake house might have to consider parking their RV someplace else for the time that they are there.

Financing your vacation home, if not purchasing with cash, could make or break, or certainly put off, your plans. Because this home would not be your primary residence, lenders may be “tighter” in lending, requiring a larger down payment, for example, as proof that you’d be able to handle your increased debt load. Your primary residence and any debt that you hold on that, would certainly be considered when granting approval for lending. As always, it’s best to speak to a lender prior to beginning your search to get a better idea on what you would be approved for. Your heart may say a log cabin in the woods with 3 bedrooms and 3 bathrooms. Your wallet may say a lean-to with an outhouse.