November, 2011

Questions to ask yourself when buying a vacation home

Friday, November 18th, 2011

If you are contemplating on buying a vacation home, you might want to answer these questions first:

Where to buy?

One of the most important consideration when buying a vacation home is the location. You might like a place when you visit it the first time but you have to think long-term before buying a property.

You need to think how you will get to your vacation home. Most vacation home buyers actually opt to get real estate which is a around fifty miles away from their primary home. As much as you want to get a beach front property in a tropical island, you should be realistic since you will not go there for a weekend get away.

Are you buying it to be rented out? You might consider this if you need an extra income so you can pay for the mortgage of the vacation property. If this is your concern, you need to get a vacation home on a popular travel destination where tourists sought for short-term accommodations.

Can you afford it?

Times are tough and having a second mortgage is another responsibility. Do the math first and do it right since your dream vacation home might be your worst nightmare if you cannot pay for it.

Think about financing since you might be paying higher down payment and get higher interest rrates for a second home. You also need to think of how you will handle the insurance and maintenance.

Will it be a smart investment?

If you are planning to get a vacation home, it might help if you will also think of it as a rental property. You will not be using it all the time so it will be wiser to have it rented out. So when looking for a property look for something that can be rented out.

How will the vacation property affect your taxes?

As an investor you should know how getting a new property will affect your taxes. You do not want to have problems with the tax collection agency. You also need to prepare additional paper works if you want to rent out the vacation home. If you rent it out, this will be an additional income and might be additional capital gains tax for your books.