It’s peak season for vacationing, and many of you already have or will be heading to the beach or mountains this summer. It’s what we do when it’s hot in HOTlanta. But here’s the question: Are any of you considering the purchase of a vacation home?
It sounds good but first let’s review a few of the myths that may trick you into wanting the perfect vacation home:
- The rental income will cover the mortgage and expenses each month.
- It’s the perfect time to buy.
- How hard can it be to manage the property from afar?
- It’s a great investment opportunity.
- I’ll use it myself. Really, I will.
If you can afford a vacation home as a second home for personal use only, then sure, go for it! But even in this situation there are financial and non-financial issues to consider. Besides the obvious purchase price and mortgage obstacles there are other expenses including: utilities, property taxes, insurance, regular maintenance and repairs, not to mention the possibility of HOA fees. There are income tax implications as well. If these ongoing expenses don’t cause you to bat an eye, then you can probably afford this luxury.
On the other hand, a second home may not be affordable for personal use only, so you may think it would be a good investment opportunity. As we have heard some say: “Buy a vacation home and rent it to others so they pay the mortgage and utility bills each month.” This too can work, if you can afford the additional expenses, time obligations, and headaches related to a rental. Remember, you will be dealing with unique individuals who paid top-dollar (you hope) to stay in your place. They’ll have high expectations for a great experience.
You may want to proceed, but there is one last thing you must wrestle with - do you and your family truly want to vacation at the same spot time and time again? Emotions have a way of clouding our judgement when everyone is enjoying the moment, but this is a serious consideration. Maybe it’s worth waiting until you are back home a month or two, back to the daily grind, before you make the snap decision to make the offer to buy.
A vacation home may be right for you, but just like any significant purchase you make, you need to know what you are getting into. Ask questions, get educated, have meaningful conversations, and be very clear about the risks vs. rewards. Then, make your decision with your eyes wide-open.
We wish everyone a fun and adventurous summer vacation season! Life’s a journey – navigate it wisely!