Summary – Buying A Vacation Home
Like any other significant financial decision to make, the process of buying a vacation home should be seriously taken into consideration as the financial ramifications involved can affect you for the rest of your life. You need to know that exactly it is that you are looking for. Also, try paying close attention to the numbers in order to make sure that you will walk away with the best deal available at that moment.
First of all, you should start by looking where you have vacationed in the past or if you want to go to a new area, it is best to rent a property there for a season to figure out if you like it enough to buy a property there.
The second step is the most critical one as you need to get preapproved for a mortgage. It is even more critical if you already took a home loan as it will add to your debt level. You will be certainly limited to what the lender will give you, depending on how much money do you owe on your primary residence. You have the option to search refinancing your primary home at a lower rate for cash in order to get that second home you want.
Now would be a good time to think about what you really want. With other words, what type of vacation property are you looking for: condo, house or a cabin? You need to know that the first ones come with an entire bunch of issues, like HOA – Home Owners Associations. If it is near the water, it means that it is a more desirable location, meaning that it will be more expensive. This statement is however not entirely true as there are some exceptions, like Cape Coral, Florida, where although the properties are near the water, the prices are good, very good as a matter of fact.
Before selecting the property that you have put your eyes on, you should interview a couple of local real estate agents and ask them how many houses they have listed, how experienced they are as well as if they have a particular specialty. Be careful when you choose the real estate agent, you need to be fully comfortable when speaking to him in order to get a good deal.
It is highly recommended to browse various homes in different settings in order to catch a glimpse of how size, location as well as other factors that will influence the price differences. Don’t forget to think about the ongoing maintenance like what will happen to it when you don’t live there, or if the house is a subject to various weather conditions, things like these. Remember to check with the HOA, if there is one to find out about any possible restrictions on renting your property.
Last but certainly not least, take into consideration the fact that the IRS will categorize your house as an income property rather than a residence if the house is available for rent for more than 14 days a year.