How to Buy a Summer Vacation Home

Buying a summer vacation home allows you to save money on hotel accommodations, make money through rental income and have a home away from home to which you can retreat. Depending on where you choose to buy, a summer vacation home may also be a sound financial investment.

Difficulty: Moderate

Instructions

Things You'll Need:

• Mortgage broker
• Local realtor

1. Evaluate your finances or work with a financial advisor to determine if you can afford to buy a summer vacation home and how much home you can afford to buy. Remember to factor in all of the possible costs associated with buying a second home including financing, home insurance, property taxes, maintenance and property management.

2. Decide where you want to buy. Most people buy summer vacation homes in areas that are convenient to where they live. Unless you plan on staying in the home the entire summer, your vacation home should be located in an area that's easy to get to for quick trips.

3. Assess the investment potential of the area you would like to buy in, depending on how you plan to use the property. Research the trend of home prices nearby to evaluate the market's appreciation rate. If you are going to need rental income to help offset your mortgage, choose a location in a popular travel destination where short-term renting is common.

4. Work with a local real estate agent to find the property you want. Local agents will be more familiar with the market, and they can help you locate properties that may not be advertised.

5. Choose a home that works for you and your family, but still represents a sound investment. Odds are that you will not get to use our vacation home as much as you want if you won't be living there the entire summer. It's good to have the option to rent it out or sell it should the need arise.

Tips & Warnings

• Working with a mortgage broker to find the best financing terms for a vacation home mortgage can be helpful. A mortgage broker can provide valuable insight into creative financing options you may not be aware of otherwise.
• If you rent out a vacation home for more than 15 days a year, the IRS requires you to pay taxes on rental income. On the plus side, however, additional deductions relating to property management are also allowed, so it may be a net gain.
• Most lenders charge a higher interest rate on mortgages for second homes than on primary residences. You may also be required to provide a higher down payment.
• Insurance rates may be high in some popular summer vacation spots due to the increased risk of natural disaster. Shop around for insurance quotes on a property before signing on the dotted line.