How to Buy a Vacation Home

    A vacation home sounds like heaven to most people, but the process of getting one often sounds like anything but.
    You may be daydreaming of owning a mountainside log cabin with multiple fireplaces, ski-in access and powdery slopes nearby. Could it be an oceanfront beach house just steps from the sand, in a location with a warm sunny climate year-round? Or perhaps you dream of a lake-front home with a large porch and a sweeping view of sunlight on the water. Sounds enticing, something worth spending many hours daydreaming about. But is it possible? Fulfilling this dream takes attention to detail and focus on fulfilling long term goals. 
    Two financial factors may help bring your daydreams closer to reality: the 80-year long-term stock market rise (despite some slides) and interest rates that remain historically low (past performance is no guarantee of future results).
    Yet in addition to housing costs and interest rates (not to mention your lifestyle preferences, the home’s location and conditions of the real estate market), you should take many considerations into account before purchasing a second home. If the factors add up right for you now, owning a vacation home may bring years of happiness. But if the time isn’t right, re-evaluate your long-term goals to see if you can buy this home in the future – and avoid a ton of hassles today.
    There a few issues to consider before determining if this dream could be your reality.
    Location, location, location: The number one rule of real estate. Think about how far you are willing to travel from your primary residence. Consider the travel costs involved. How far would you be from work? Finding a location with bountiful natural and recreational opportunities will pay dividends down the road. You must also consider the economic history and current conditions of the new region. Finally, don’t forget to account for the state and property taxes. 
    Financial fitness: Naturally, one must ensure purchasing a second home won’t compromise or threaten your long-term financial goals. If you have a chronic illness or medical needs, for example, you want your income, assets and savings to cover those costs first. Your financial advisor may be able to help assess your preparedness and guide your strategy to buy a second home while keeping your long-term goals on track.
    Count all costs: The true cost of owning a vacation home goes beyond the purchase price and mortgage interest rate (if you choose to obtain a loan.) Maintenance, utilities, property and state taxes, prices of seasonal activities, weather concerns and insurance all change constantly and add up quickly. Consult with a real estate agent as well as with a tax advisor as you evaluate these variables.
    Investment, rental property, legacy or fun house: If interested in this property purely for investment, think about improvements the home may require, the availability of skilled help in the locale and the economic history and vitality of the community. Also consider how long you want to – or must – retain the property to get a reasonable return on investment.
    If planning to rent your vacation home, consider the tax implications that will arise from rental income. Renting the property may also force you to incur additional expenses, such as repairs of tenant’s damage. 

    If you hope to simply treasure time at a second home – escape for solitude, recreation or making memories – the new place can potentially turn into your retirement home. Is that attractive to you? Do you hope one day to make your vacation home a legacy to be handed down for generations or is your interest more short-term?

    Co-ownership: The more might seem the merrier when owning a vacation home, so you can split costs – but make sure you iron out what happens if one owner can’t pay the agreed-upon share of expenses.

    Regardless of what you decide, consult an attorney to fully understand the implications of your decisions. When you’re thinking about a second home, your heart and head must work together so you meet all of your needs.

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