Buying a resort home

Before you make a decision to purchase a vacation home, we suggest you define your goals.  Write them on a sheet or two of paper.  You should be able to categorize your objectives in one of two ways:

Buying for personal reasons

  • Are you buying a second home for personal reasons or for financial reasons? If you are considering buying a second home for personal reasons (to have a getaway in a beautiful setting), ask yourself the following questions:
  • Where do you want your vacation home to be located? (On the waterfront? Near the beach? In the mountains? Near a golf course?)  Are you looking for a warmer or a more seasonable climate?
  • How far are you willing to travel to a vacation home? Are you expecting to drive or will you have to fly to get to it? Are you willing to put up with the hassle of getting to and from the house every weekend/month/year if it is located far away?
  • How big a vacation home do you want (both in square feet and in number and types of rooms, and the amount of property you hope to obtain)? How much maintenance and repair work are you willing to take on?
  • Are you looking for special features, such as a swimming pool, a boat dock, easy access to ski lifts, or an outdoor deck?
  • Is this a home that you will live in when you eventually retire?  If you are thinking of a second home primarily as a financial investment, ask yourself the following questions:

Buying for financial reasons:

  • How much can you afford to pay monthly on a vacation home in taxes, maintenance and upkeep, and mortgage?
  • How long do you expect to hold on to the property?
  • How much do you hope to eventually profit from this purchase? What is the expected price appreciation in the area you've chosen?
  • Are you planning to rely on rental income to help carry some of the annual costs?
  • What type of financing do you expect to obtain?
  • Can you afford to carry two mortgages and pay for extra utilities and maintenance costs for the period of time you intend to own the house? How does this investment fit into your total personal finance portfolio?
  • Have you considered the tax consequences of owning a vacation home?

 

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