3 Important Steps To Take Before Purchasing A Vacation Home
Being a homeowner is awesome, but being the owner of a second, or vacation, home is the ultimate. A vacation home isn't just a financial investment; it is also an investment in your family and your serenity, as it offers you a lifelong destination to enjoy both. Enjoy these benefits and get the most out of your purchase with these helpful tips.
Make A Long-Term Financial Plan
One of the scariest things about life is uncertainty. Since you can't avoid the twists and turns, you need to at least equip yourself to navigate these transitions with ease. Before researching properties, create a long-term financial plan. Draft a budget of affordability that doesn't just take into account your current financial situation, but also where you anticipate you will be in the next 10 or 15 years.
Don't just focus on the mortgage payment. Also factor in taxes, utilities, management company fees, standard homeowner's insurance, and specialty insurance, such as hurricane coverage for a beachfront property. Only make a purchase that is going to be financially smart today and in the future.
Thoroughly Research Locations
You took a vacation, fell in love, and immediately returned home destined to purchase a property in the area – not so fast. Living in a location is a lot different from visiting as a tourist. Thoroughly research the specifics of the area.
Take a mountain property in a wooded area, for instance. Are you prepared to invest in a snow blower, do you understand the risk for forest fires, and can you accept the fact that in periods of adverse weather the property may be inaccessible? If you can't embrace these scenarios, you might want to consider a different location. While there isn't necessarily a right or wrong, you do want to consider just exactly what you can deal with.
Learn About Tax Consequences
When it comes to tax consequences, being the owner of a second property doesn't just come along with more property tax liability. How you use your property can open the door to more tax consequences. If you plan to rent the property out you will owe income tax.
This is true even if you only rent out the home for part of the year, any revenue earned will be taxed as income. If you're making an international purchase, you don't only have to consider the implications domestically, but also any requirements imposed by the country where the property is located. Keep in mind that international tax laws can vary greatly from U.S. laws, so investigate closely.
The more time and effort you put into preparing for your purchase, the more enjoyment and fulfillment you will gain.
