Posted by Michael Kahn on
Found Your Place In The Sun?
5 Questions To Ask When Buying
That Vacation Home
1. Why Do I Want to Buy?
The answer should not be merely that houses are so inexpensive. Anyone purcinvestment purposes, but because they plan to use it as a getaway. If that’s the case, make sure you have realistic expectations about when and how often you’ll use it. Will kids’ sports and other activities really allow you to get away that frequently? Or, if you’re planning to retire there, have you visited during the off-season?
2. What if prices dip further?
It is safe to say that the biggest drop of the price plunge is over. Yet the nation’s median home value is still forecasted to fall an average of 5 percent over the next year, and more than twice that amount in hard-hit areas such as Miami. So what looks like a bargain today may not turn out to be one a year from now. Buy only if you plan to hold on to the home for at least five to seven years.
3. Can I Pay Cash or Get Financing?
Today, about 30 percent of second home sales are all-cash. This increases your chance of success. For a mortgage in today’s environment, you’ll need 10 percent down.
Consult a mortgage lender before you house hunt.
4. Do I Know My True Costs?
In some vacation areas, home insurance runs up to four times as much as that of your primary home. You’re there less often (meaning you’re at potentially greater risk for theft or damage), and many vacation homes are in flood or hurricane-prone areas, so get a quote from an insurer before you bid. Similarly, property taxes vary greatly by state, so consult a tax expert. Finally, some condo and homeowner association fees are spiking because fewer owners are paying up, particularly in distressed areas. Ask your real estate agent what to expect in fees, and the likelihood of costs rising.
5. Is the Home Affordable With No Rental Income?
Buyers tend to be overly optimistic about how much they’ll earn from renting the home to other vacationers. To play it ultra safe, aim to cover the costs of a house with your own funds. Think of any rental income as icing on the cake.