With the interest rates at its lowest in years, buying a vacation home may not be a bad idea right now. If you are considering the purchase of a second home, the Better Business Bureau advises you to focus more on the actual property and price, than on the amenities surrounding the property. You want to be sure to choose a vacation home that is going to appreciate in value.
Before making a decision, the BBB suggests you consider the following:
- Do you want to buy or rent a property? If you choose to buy, make several trips to your dream spot. Talk with other vacation homeowners in the area to get a feel for what the community is like year-round.
- Decide how often you will be using the property. If you plan to spend a week or two out of the year, then you will probably be spending a lot of money for each day there. Keep in mind that mortgage payments have to be paid year-round, as do payments for insurance, taxes and necessary regular maintenance. In this case, buying may not be the right thing to do. Renting may be a better option.
- How desirable is the location? Is the location a place you want to visit again and again? Will the location cause the property to appreciate in value? For instance, a rural hideaway may be great for hunting, hiking or just getting close to nature, but its value may not appreciate as fast as a more comfortable place located near resort areas and amenities.
- Look for property that offers activities year around. Consider properties that are easily accessible to services, protection and cultural activities.
- How are you going to finance your vacation home? You can buy your vacation home by obtaining a mortgage, or buy it for cash. The mortgage rate for a vacation home may be slightly higher than for a primary resident. That is because some banks see a greater risk of a borrower abandoning their vacation home in times of trouble than a main residence.
- Talk to a qualified tax advisor about your tax obligations. According to the Internal Revenue Service, if you rent your home for 14 days or less in a year, you do not need to report the rent. Beyond the 14th day, the home is considered investment and rent must be reported.
- If this is your first vacation home, you may want to hire a rental company to take care of your home for the first year until you get a feel for the job. Keep in mind that contracting out maintenance jobs can get expensive.