Consider these three factors before you start shopping:

1. Where is it? If you’re a Northeasterner who dreads the winter months, it may be tempting to contemplate a second home somewhere warm and sunny. If you’re considering a place you’ve only visited as a vacationer, keep in mind that owning a home involves much more. You’ll want to ask yourself: Are you willing to travel several times a year to get there— either by plane or car? Does the area experience severe weather? Have you visited during the times you plan to be there? A vacation home could eventually be a full-time retirement home, so consider location carefully.
2. How will you use it? Like your primary home, a vacation home is an investment. By purchasing your vacation home rather than renting each time you visit, you’ll build up equity over time and could benefit from its appreciation in value. If you plan to use your vacation home to generate rental income when you’re not there, you’ll want to make sure you fully understand the financing and tax implications, as well as any state and local restrictions on property use.  A local Buyers Agent can provide valuable guidance, as these rules can be complex.
3. Can you afford it? Financing a vacation home can be difficult. Second properties are typically subject to higher interest rates—0.25-0.5% higher—and significant down payments—up to 50%.  In addition to your monthly mortgage, factor in taxes, insurance, utilities, potential HOA and condo fees, and other items like furnishings and seasonal gear. Additional flood insurance is also required in areas at high risk.  Consider special equipment like hurricane shutters—and also be ready to pay someone local to secure your property when you’re not there. If you don’t visit frequently, you’ll need to contract out for regular home checks, snow removal, pool care, landscaping, and other maintenance.  Finally, think carefully about how this all fits in to your longer-term financial goals like funding higher education expenses and retirement.

There’s a lot to consider before deciding whether a vacation home is right for you.  A Realtor can help you weigh the pros and cons, evaluate the tax implications, and outline what to expect when you apply for financing.  Because many vacation properties are in specialized local markets, it’s best to find a local Realtor who can advise you properly.

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