Buying a second home: pros and cons
Every time you fall in love with a vacation destination, you play with the idea of buying a second home. But will the reality live up to the daydream? Advantages include:
Of course, there are drawbacks. Learn how to minimize them, and if vacation home ownership is right for you.
Why are people buying a second home?
The 2017 National Association of Realtors (NAR) Investment and Vacation Home Buyer’s Survey reveals some useful information about people buying a second home. For example, when it comes to buyers of vacation homes, respondents to the survey revealed three main motivations:
Twenty-nine percent of those buying a vacation home either tried and succeeded or tried and failed to rent out their home in 2016 and planned to do so again in 2017.
In 2016, the median sales price for primary residences was $215,000. For vacation homes, it was $200,000. This suggests those buying a second home are hardly holding back.
But, of course, such averages conceal huge variations. At one extreme, you can still buy a shack on a couple of acres in the Appalachians for under $20,000. At the other, the Henry Ford estate in the Hamptons is listed for $175 million. Both could end up as vacation homes.
In the NAR’s survey, the median distance between the buyer’s main residence and the vacation home was 200 miles. However, that median again disguises some wide variations. Thirteen percent were less than 50 miles apart while 21 percent were 1,000 miles away or more.
Favorite locations for vacation homes were:
You’ll choose for your second home the location that most appeals to you. But it’s worth noting that a majority (57 percent) of buyers prefer proximity to water. That could be important to the price you get when you come to sell the property.
The advantages of owning your own vacation home are pretty obvious:
Sold on buying a second home? Wait to decide until you’ve read the cons.
The biggest mistake many buyers of vacation homes make is kidding themselves over costs. They compare mortgage payments (in that NAR survey, only 28 percent paid cash) with hotel rates and restaurant prices and persuade themselves they’re going to get cheap vacations.
But, as those same buyers know only too well when it comes to their main residence, mortgage payments are only one cost of owning a home. There are property taxes, insurance premiums, utilities, preventative and other maintenance, homeowners’ association fees where applicable … the list goes on.
Even those who rent out their vacation homes for significant periods each year sometimes find it hard to cover all their costs. See your vacation home for what it is. A luxury purchase, like buying a vintage car or staying in the very best hotels. Such things aren’t cheap, but if they’re important to you and you can afford them, why not?
Affordability isn’t the only potential issue with a vacation home:
The joys of owning a vacation place can easily outweigh all these cons. But you should at least consider them when you’re buying a second home.
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