6 Questions to Ask Before Investing In a Vacation Home

Everyone will love the idea of having a vacation home at a place of their choice where they can simply go and unwind. This could be anywhere – probably by the beach or somewhere surrounded by high picturesque hills. The idea of vacation homes is to generally be somewhere close to the nature, a unique beautiful place that is as cosy as it is romantic. But you cannot just wake up one day and decide to buy one just on a whim.

No, you’ve got to plan several things beforehand and ask yourself questions that will help you arrive on a decision that’s beneficial.

What is the duration of your vacation?

The first question to consider is how much time do you have for your vacations? Most people have about 4 weeks off a year excluding those who have the opportunity to work from home.  And if you are amongst those with only 4 weeks off, then renting a place or booking a hotel room is better than investing in a full time home. Buying a property for such a short period does not make any sense. Moreover, you have to stay at the same place over the years during all your off days.

Can you put it on rent while not in use?

Making rental income from an investment property is no doubt a good option as it reduces the risk of credit as a borrower and also makes enough money to pay the mortgage or loan. But here you need to be aware of the fact that banks are more stringent on loans for a vacation home.

So if you are dependent on this side income to offset the ongoing cost of your second home, then think again, because, practically it’s not as easy as it seems to be. You will have to pass through many procedures for its registration and documental work that is very complicated.

Do you already have mortgage?

If you are already paying a loan for your primary home or any other property then it’s not worthwhile to take one more debt before paying off the first one. In case you’ve almost entirely paid off the previous mortgage amount, then and only then move ahead for another one.

Do you wish to own it forever?

According to a survey, very few people tend to own their vacation homes for forever, which is good because it does not make any sense to hold on to a property for that long. Most investors plan to keep it for 7 to 8 years which is also not good for investment as you will not get the actual benefit within such a short period.

The ideal time to uphold the property is 20 years so make long term investment plan and  wait it out to see the real output.

Will this improve your lifestyle?

The first thing to consider before taking any financial step is to see if it makes your life any better and if this is not the case, then forget about it and think of other options. An impractical investment that lands you in trouble is only a headache and a direct invitation to financial crisis.

So, when investing in a vacation home, think wisely and practically.

Have you thought of the ‘after buying’ expenses?                         

Buying a property is not the only thing - you will have to add amenities to it to make it worth living. It’s a home in which you are supposed to spend your quality time with family and friends.  So apart from the four walls, you will need all the necessary items to spend your vacation as comfortably as possible. Right from the furniture to electronic appliances like fridge, AC, designer radiators, light, fan etc. has to be installed and maintained properly.

Not only the bedroom, but the kitchen too should be stocked in order to cook a meal just in case.  So make sure that you can afford all of it along with the yearly maintenance costs and other expenses as well.

After analysing all the questions carefully, think whether you have enough funds and if you don’t then think twice before investing. Take your own sweet time and consider all the factors that will help you with yours decision.