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Whether it’s the warmth, water, mountains, or country, owning a vacation pad can be a beautiful experience. But it’s easy to forget about the complex challenges and expenses that accompany second-home ownership.
Over the past year, the pandemic has inspired countless American families to escape the stresses of city living. For many, a home in sunny Florida, the Hamptons or down the Jersey shore has been a blessing–-a long-awaited light at the end of the quarantine workweek. But for others, the ultimate impulse buy has come with a mountain of downsides.
Problem is, many are realizing these unforeseen concerns too late.
Getaway goals: COVID edition
According to Pew Research Center, 22% of U.S. adults moved or know someone who changed residences due to the pandemic. In highly populated urban and suburban areas, many purchases are attributed to families investing in a second home.
In the period between July and September of 2020, the National Association of Realtors observed a 44% gain in vacation home sales, clocking 109,100 transactions compared to 75,600 in 2019. And the pandemic isn’t the only motivation to move.
“Low mortgage rates have increased the desirability and affordability of owning a vacation home,” writes Scholastica Cororaton of NAR. “Buyers may be desiring a vacation home as a weekend getaway as urban-based leisure activities are still constrained by social distancing. The ability to work from home also means buyers can spend more time at and enjoy their vacation home.”
Tourist destinations like Windham, Vermont; Cape Cod, Massachusetts; Cape May, New Jersey; Rehoboth Beach, Delaware; Rockland County, New York and the Pocono Mountains in Pennsylvania have all seen huge gains since last year. This year we’re also seeing lots of second-home purchases all over New York, New Jersey, and Florida as well.
If you’re thinking about taking the plunge with your own personal COVID sanctuary, keep an open mind. While a beachside condo, mountain cabin, or lake house may seem like sunshine and butterflies, there are costs and logistical issues to consider.
Let Everest be your getaway guide!
5 Important Considerations When Purchasing a Vacation Home
1. Weigh the pros and cons
For many families, buying a vacation place is a shotgun decision. It’s important to discuss the positives and negatives that come along with this investment.
On the upside, land (generally speaking) increases in value—especially in tourist locales popular for sand or snow. Even if you decide to unload the property a few years in, you’re bound to make a profit. And don’t forget you can always rent your home through an agency or a listing service, such as Airbnb. Still:
“There also might be cons that aren’t immediately obvious,” says Cororaton. “When the novelty of your vacation home has worn off a bit, are you going to start thinking that it might be fun to go on a vacation somewhere completely different?”
2. See if you can swing the cost
Beyond a second mortgage, vacation homeowners must also juggle additional expenses. Seasonal utilities, furnishings, everyday upkeep, association fees, costs for someone to look after your home, and other expenditures can add up.
If you open up your vacation place to paying guests, you must also think about potential damages. Renters will not treat the home with the tender loving care that you do. It will cost you to clean and maintain the space, and the company you hire to manage your rental will take a portion of the proceeds.
3. Keep an eye on COVID restrictions
Purchasing your dream vacation home is exciting regardless of a pandemic. But once you’re moved in and settled, what exactly can you do?
Over the past year, many families were disappointed to find that the home or condo they purchased was open—but the typical community amenities were closed. Just like hotels, resorts have been hit-or-miss when it comes to pool and gym facilities, restaurants, playgrounds, and other extras. That’s a big part of the experience.
4. Make sure you can pay it down
Maybe you have crunched the numbers and feel confident you can afford your mortgage and utilities each month. But what about step one: the down payment?
Banks grade second homes as riskier than your primary residence, often requiring a larger downpayment.
Unless you are paying cash, a 10%, 15%, or even 20% downpayment may be required to secure a second or third property. Be sure to have sufficient funds well in place before you shop or sign any binding offers.
5. Buy for the right reason
Making money on your vacation home—in the form of rent or future sale—appears to be a hidden perk to your family’s awesome escape. But agents are weary of buyers investing in a second home solely for investment reasons.
“The short-term rental market is incredibly competitive and already filled with second home owners trying to eke out next month’s mortgage payment by attracting a short-term renter,” says Vander Stelt of Quadwalls. “Unless you are ready to become an expert in marketing your property, your short-term rental income will be pretty inconsequential.”
Sure: be bold! Go shopping and find what inspires you in a vacation home. Make sure you love your new getaway spot so that you can enjoy your time there to the fullest—regardless of potential income.
Everest says: get away the smart way