When you find the perfect vacation destination, you may find you never want to branch out and try somewhere else. After all, that cozy beach community or bustling mountain town has great restaurants, a ton of opportunities for fun, a welcoming community, and generally provides a great place to get away and relax with loved ones. But after going back half a dozen times and ending up in a different vacation rental each time, it can start to get a bit frustrating. You’re visiting to relax, kick back, and enjoy your vacation, not spend the whole trip learning all the quirks of a new place. As much as you love a destination, it can seem like a great idea to just buy a home in the area. But is buying that vacation home actually worth it?
Whether we’re talking about a ski town like Sun Valley or a beachgoers haven like Miami, buying a house in any vacation destination specifically to use as a vacation home may sound like an amazing investment—and it certainly can be!—but there are a few things to consider before diving in. First and foremost, there’s the question of expenses. But there’s also the consideration of what to do with the home when you aren’t visiting, how you’ll handle any upkeep needs, and so on. Before you contact a real estate broker and begin wading through the list of luxury house options, it’s important to weigh all the variables and determine whether buying a vacation home is more worthwhile than continuing to rent when you visit.
First and foremost, can you afford that investment property? While real estate is generally a good investment, there is no guarantee that you’ll be able to sell the home for a profit. If, for example, a recession hits, that income property may or may not hold its value; it may actually lose value until the economy picks up again. After all, destination vacations are some of the first luxuries that get scrapped when trying to buckle down and save money, which means homes in those destinations are fairly likely to lose value if the economy tanks. So, until the point at which you are ready to sell comes, you can’t count on income from that property.
The biggest question to ask is whether or not you can afford the home. That means the obvious expenses like a down payment, insurance, and closing costs. However, those aren’t the only expenses to factor in. You’ll want to account for ongoing expenses like your monthly mortgage payment, HOA fees, property taxes, and any fees for a caretaker or property manager. And don’t forget to factor the cost to furnish the new home. All of that can add up quickly. The good news, of course, is that you don’t necessarily need to purchase that vacation home right away. You can always continue to rent while you take the time to get your finances in order.
The other major consideration, when purchasing a vacation home, is whether you’ll rent out the home when you aren’t there, or if it will sit empty while waiting for you. Both options come with pros and cons, so there is no easy answer here. Renting it out means you’ll be able to enjoy additional income to help subsidize the cost of ownership. However, if you’re renting it to other vacation-goers, you’ll need to find a reliable cleaner and handyman to care for the house in between renters. You may also choose to pay a property management service to handle renting the home for you, though there are also online programs like Airbnb and VRBO that help you rent vacation homes securely.
The risk you run when renting out your luxury house is the damage that others may do, intentionally or accidentally. Because it isn’t their home, many vacationers will be less cautious around the property. The rental contract will protect your home to an extent, but damage may still happen. Then, it’s up to you to get it fixed and generally to keep your home in good repair. The other caution when it comes to renting out your vacation home is that you cannot count on that as regular income. During popular holiday times, odds are good you’ll be able to enjoy back to back rentals. During slower seasons, however, that’s less of a guarantee.
Choosing to leave the home empty when you’re away is also an option. Doing so means you can reliably expect your vacation home to remain in good condition. However, even with an excellent security system, your luxury house will be more of a target to thieves. You’ll also want to have someone routinely check up on your home in case of accidents like a pipe bursting.
This isn’t all to consider before choosing to buy a destination vacation home. Be sure to stay tuned for part 2 of our blog series. If you’re ready to start hunting for the right luxury house here in Sun Valley, contact the local, experienced team at Coldwell Banker Distinctive Properties today!