Purchasing a vacation home is a great opportunity to ensure you always have a place to stay for a vacation while also creating a second income if you choose to rent it out. It becomes a home away from home, where you can invite friends and family to enjoy their vacations with you.
So is a vacation home a good investment? We’re taking a look at everything you need to consider before buying, as well as any disadvantages to purchasing a vacation home.
- Things To Consider Before Purchasing a Vacation Home
- Benefits of Owning a Vacation Home
- Disadvantages of Owning a Vacation Home
Things To Consider Before Purchasing a Vacation Home
Purchasing a vacation home is a big investment in terms of time and money. That’s why before you make the decision, you should consider the below factors:1. Stage of life
Are you just starting on the property ladder, or are you approaching retirement and considering downsizing? Depending on where you are in life, your financial obligations may affect whether or not purchasing a vacation home is possible. If you decide to pursue buying a vacation property, even though you have other financial obligations, you may have to alter your financial goals to accommodate.2. Job security
As COVID-19 continues to cause disruptions to the world’s economy, having job security is very important. Without a consistent stream of income, owning a vacation property is very difficult.3. Finances
Are you confident you have the money to buy a vacation home in the first place? Increasing your debt burden is never the best place to start. And what about annual budgeting?
Will you rent your property out? Income from rentals can contribute towards annual property costs. Do you know how much it will cost you each year to run? You need to allow for annual service charges to cover routine repairs and maintenance, utilities costs, and a reserve fund. And if you are renting, you will have rental costs such as marketing, laundry and housekeeping to consider.4. Distance
How close is the location where you’re hoping to buy a property? How far you have to travel will affect how often you visit. If it’s too far away and you only see yourself visiting once a year for a week or two, it’s probably not worth buying.
Benefits of Owning a Vacation Property
There are a variety of benefits to owning a vacation home, including potential rental income. During the high season, you could bring in premium rents. It’s easily done and as some vacation developments offer rental and management programs, you won’t have to manage the property while away and will benefit from a secondary source of income.
Although the value of real estate continually fluctuates, vacation homes usually retain their value and appreciate. This is likely because of their tangibility and the desirable areas these properties are located. So if you were to sell the property in the future, in most cases it will hold or increase in value..
One of the greatest hassles of going on holiday is the stress caused by baggage and extra fees. With a vacation property, you can make it your home away from home and travel far lighter by storing some items at the property.
Share With Family and Friends
A vacation home offers the chance to share memories with family and friends every year in a space that’s comfortable and convenient for you all. Instead of worrying about renting different properties, you can invite any friends and family you’d like to stay with you in your beautiful vacation home.
Disadvantages of Owning a Vacation Home
If you choose to rent out your vacation home while you’re not there, you’ll be earning regular potential income which is a great advantage. However, there are also downsides to doing this.
Alongside mortgage payments and homeowners insurance, you’ll also need to ensure your renters have everything they need to stay comfortably in your vacation home. There is also regular maintenance and repairs to consider. You’ll need to take lawn care, air conditioning, peeling paint and gutter cleanings into consideration.
Your vacation property will eventually require essential appliances to be replaced. As these kinds of things tend to break down unexpectedly, you might not have the time to shop around for the best provider. That means you may have to pay more than you anticipate.
The materials and labor required to maintain your property will add up quickly. Our advice would be to set aside a percentage of the total purchase price of the property for home maintenance each year. Many experts suggest budgeting 1% of your home’s total purchase price to replace appliances. To be extra safe, saving 3% is advised so you always have a reserve maintenance and repair fund.
You’ll also have to consider whether you’ll be monitoring your vacation home yourself or using a management service. Maintaining a property can be a full-time job depending on its location, which is why it’s better to engage a property management service.
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Bermuda’s south shore is home to a hidden piece of paradise called Bermudiana Beach Resort. It’s a stunning oceanfront property set to open April 1st, 2022. Fully furnished with 90 condo residences, we believe it’s the ideal place to purchase your second home.
Naturally, you’ll have lots of questions you want to be answered before you buy. So to learn more, click the button below.