Three Things to Consider When Buying a Vacation Property
A lakeside cabin to enjoy retirement or getaway home to vacation with family is a dream for many of us. Purchasing a vacation property requires considerations that are distinct from buying a primary residence, but with planning, the dream can become reality. Here are three key considerations to keep in mind.
More than just an extra mortgage payment
When considering a second home, many buyers fixate on the asking price and the monthly mortgage payments. Don’t forget to factor in the ancillary costs — taxes, insurance, snow removal, lawn care, household maintenance, travel expenses to the property, furnishings — and budget accordingly.
Think of your second home as a long-term investment and capture benefits when available. For example, mortgage interest can be tax deductible for second homes as long as their primary purpose is not to generate income.
When is the right time?
People buy vacation properties for different reasons, from family time to retirement getaways. Before purchasing a vacation property, consider its purpose, who you want to enjoy it with and the property’s potential long-term use.
Do you foresee future generations enjoying the property? If so, you may want to buy a bigger parcel of land, or a home you can add on to later. If your dream is having a lake cabin to take the kids to every weekend, don’t wait until they are in high school when obligations and waning interest may impact the fun.
Make it a family affair
Vacation properties are often a family affair. So why not purchase jointly with family members to make it more affordable? Many families do this, but make sure you have a clear agreement on roles and responsibilities. How will the purchase and ongoing expenses be divided? Who gets to use the property and when? Document the decisions to avoid potential future disputes.
Don’t forget to consider what will happen with your vacation property when you are gone. Will it be passed on to heirs evenly? What if some don’t use it, can’t afford to maintain it, or want to sell it? By placing your vacation property in a trust, you can preemptively answer those types of questions.
When thought through carefully and planned for well in advance, the purchase of a vacation property can indeed be a dream come true.