Your Guide to Buying Your Vacation Home
Research regarding the vacation home market indicates the secondary home market is strong and thriving. And it's easy to understand why. In our hectic and stressful lives we all dream of a place where we can go and"escape" from it all. We'll help make your dreams come true.
Throughout this guide, we attempt to answer some of the most common questions buyers tend to ask. For additional information, contact us at firstname.lastname@example.org.
Can I afford to buy and maintain a second home?
Second-home ownership is surprisingly affordable. According to the National Association of Realtors, the typical second-home owner earned a household income of $85,900 in 2003. Of course, your own personal finances will determine the purchase price you can afford. You should also keep in mind that, in addition to your mortgage payments, taxes and insurance, there would also be maintenance and travel costs to and from your primary residence. To offset some of these expenditures, you may want to consider renting your property or even investing in a vacant lot now and building later.
What type of property is best for me?
Single-family detached - From a rustic cabin to a waterfront mansion, the selection is endless. Single-family properties usually offer more privacy and fewer use restrictions than attached housing or planned-unit communities. Single-family, detached properties are generally more expensive than attached dwellings of similar size. And the single-family homeowner is responsible for exterior maintenance and landscaping.
Attached housing - From a studio condominium to a luxury townhouse, the choices vary here too. With an attached property, you typically own your particular unit and share ownership of the common-area amenities with other homeowners in the development.
However, you may or may not be able to own the land under your dwelling. An association normally governs attached properties through written protective Covenants, Conditions and Restrictions. Always read these carefully before your final decision to purchase, since all property owners in a development must comply with these terms and conditions.
Keep in mind monthly association dues are customary to cover the cost of exterior maintenance, taxes, fire insurance and reserves for future repairs. In some developments, portions of your utilities may also be included in association dues.
Let your interests guide you when deciding which type of property to buy.
What are my financing alternatives?
Financing a second home is similar to financing your primary residence. A lender will evaluate your credit history and rating, debt-to-income ratios, verify your employment and bank deposits.
While most lenders require a minimum down payment of 20%, some may require less - others more. But all require the borrower to have a source of income that covers repayment of the debt and allows adequate funds for expenses relating to the use of the property.
There's also certain guidelines most second-home lenders take into consideration:
- The property should be remote in distance or time of travel from your primary residence, but at a reasonable enought distance to function as a second home.
- The property must be located in a resort area that would generally appeal to vacationers.
- The mortgagor (you) can rent out the property, but the property cannot be subject to an agreement that gives a management firm total control over the occupancy.
The lender will also evaluate the appraised value of the property, its suitability for year-round occupancy and its conformity with local zoning regulations. As an option, you may also want to consider refinancing your primary residence as a down payment source.
As financing terms change frequently, keep in toucn with your sales associate for the most up-to-date programs. Coldwell Banker Seaside Realty offers an in-house mortgage company for your convenience. Visit www.midatlanticmtg.net for more information.
Who will take care of the property when I am not there?
Since you won't occupy your vacation home on a year-round basis, you should consider ways to maintain your investment when you're not there. Property management is available to homeowners in most resort areas on a fee basis with services ranging from maintenance to housekeeping.
If you plan to rent your property, using a professional property manager is highly recommended. They offer a variety of services including renter relations, security deposits and rent collection. And most important, they'll ensure you piece-of-mind while you're away.
If you are interested in putting your home in a vacation rental program, please visit our sister company, Seaside Vacations, at www.outerbanksvacations.com.
Is buying a second home a good investment?
Although it is not possible to accurately predict future investment potential for resort properties, certain trends indicate a promising future.
According to a recent survey by the National Association of Realtors, the aging of the baby boom generation and the historically strong performance of real estate as an investment are driving up demand for second homes.
Mortgage interest rates also play an important role when it comes to buying a second home. They increase affordability by lowering the monthly payment, often allowing homeowners to purchase a more expensive home.
Appreciation in home values also is helping boost second home sales. In the past five years, homes in the United States have appreciated an average of 37 percent in value. As a result, homeowners may be able to tap into the equity in their primary residence to make a down payment on a second home.
Coupling these factors together indicates that long-term investment potential in second-home ownership looks optimistic.
What tax benefits may be available to me?
Second-home ownership may offer certain tax advantages depending on the use of the property. In the United States, interest and property taxes on second homes are generally tax-deductible on your Federal income tax, and certain other rental expenses may also be deductible. Outside the U.S., other tax policies apply. Tax rules and regulations change frequently, so you should consult with your tax advisor prior to purchasing your second home.
What factors may affect the value of my home?
- A property located in driving proximity of a metroplitan area will have greater sales potential when it's time to sell.
- A property convenient to shopping, restaurants and local attractions will be more desirable than a more remote location.
- An area that offers recreational activities during more than one season will appeal to a wider selection of potential buyers.
- An attractive, well-maintained property is always easier to sell.
- A property with a good rental history will be more desirable to a buyer with investment potential in mind.