Now the housing market is stabilized, home values are rising, interest rates remain near historic lows, and new credit scoring makes home loan qualification easier, it’s a great time to buy a vacation home. Not only will it provide you with a dedicated place to stay, it can be rented out, providing a passive income. What’s more, it will also conform to the number one rule of real estate, which is location. Here in Orlando, there’s certainly plenty from which to choose, and, it is one of the most sought after travel destinations in the world.
Tips to Buy the Right Vacation Home
Though conditions are right to buy a home, the phenomenon should not be your sole reason to purchase a vacation property. It will add to your portfolio and real estate makes for one of the most proven long term investments in wealth building. While now is the right time, all sound financial moves are based on a number of factors. Many investors have a significant amount of real property precisely because of its long standing track record.
“Even if you plan on using the home yourself with no intention of renting it out, buy a home that has good rental potential. That’s because homes that can be rented are more valuable and it’s always better to have the option of renting to others in case your plans change.” —CNBC.com
What’s more, land is finite. As it becomes more and more scarce, prices necessarily increase significantly. If you are seriously considering buying a vacation home, take these factors into consideration in order to make a more informed decision:
- Get to know the area — really well. Use the web to begin to dig deep into the various neighborhoods you are considering, and, to pick out communities that are best suited for you. In addition, it’s a good idea to know where the hot rental areas are and the average income these deliver.
- Stay in the area to learn its nuances. Before you bought your primary residence, you probably visited the neighborhood at different times on different days. This should be the same thing. Rent out a place for at least two weeks and try to do so a few times so you learn its nuances before you buy.
- Be realistic about its personal use. If you have small children, this might play a big role in your “go for it” decision. While that’s true now, think about the next several years. Even if you don’t have children, you still need to be realistic about how often you’ll stay.
- Don’t overestimate rental income. Even if you do exhaustive research about rental rates in the area, things can changes, particularly in your own life. Consider where you’ll be in the next five to ten years, and again, how much you’ll use it.
- Always buy below budget. Savvy real estate investors know that money is made on the buy. The better deal you can cut and the more realistic you are about upgrade costs and maintenance, the better.
Lastly, take the time to learn about the tax benefits and implications. While you’ll certainly be able to claim deductions, that’s got to be balanced with outlays.