Making the decision to own a vacation home after retirement can be a bit overwhelming, but it does come with its share of perks if you have the right attitude. For example, you’ll build equity in a second investment, test out a potential retirement destination, and start a new chapter in your life that could be handed down to other members in your family if you so choose.
Of course, you’ve got to figure out if you can afford a second home first. In order to impress lenders, you need to showcase that you’re responsible enough to take on a second mortgage. At the very least, you’ll need a 20 percent down payment, though the average is around 32 percent. Whatever you do, don’t over-borrow or take equity out on your primary residence or you risk losing one (or both) of your homes to a foreclosure. But figuring out how to purchase the home isn’t the only hurdle. Ahead, answers to some of the top questions people have when considering a vacation home.
Where Do I Start?
Start by researching homes in the area where you want to purchase — note that the average listing price for a home in Fullerton, California, is $700,000. It’s important to choose your location carefully before making a commitment. Consider renting in the area first so you can get a feel for the neighborhood, community, and amenities.
What Costs are Involved?
While you’ll be responsible for all the same obligations you have at your primary home, keep in mind that some of them are apt to be even higher. For example, taxes. They may cost you more because second homes are risky and/or the tax rate is higher than where your primary residence is located. If you decide to rent out your property, you’ll also need to pay income taxes on the income you make.
When it comes to insurance, your rate will depend upon the type of property you’re buying, what amenities you have, and whether the location you’re moving to is prone to natural disasters and poor weather. In an effort to save money on your policies, consider choosing a location with less risk, installing an alarm system to detect break-ins and fires, and bundling your policies with the same insurer as the one you use for your primary home — though it’s still a smart idea to shop around and get at least three quotes before making a final decision.
Who Will Maintain the Property?
Before eagerly thinking you can put your home into the hands of a rental agency, consider the fact that most buyers tend to overestimate how much money they can make by renting their home. Speak to a local vacation rental agency about how many weeks of the year you can realistically expect to generate income from your abode based on its location and condition.
Consider hiring maintenance help when you’re not around so that your home appears lived in — overgrown grass is a surefire sign nobody’s been inside for weeks. If you don’t plan on being at your property for a substantial amount of time, make sure you take a few precautionary measures to keep your home safe and your costs down.
For example, turn up your thermostat to 85 degrees to save on air conditioning costs, continue to run your pool pump so the water doesn’t become riddled with algae, turn off the main valve so you don’t come back to plumbing issues, set a few lights on a timer so your home isn’t pitch black, throw away all trash before leaving so you don’t need to call an exterminator, and check to make sure all alarms and detectors are in working order.
The decision to purchase a vacation home is a big one, so don’t go into the process blindly. Make sure you have all your ducks in a row before planning those beach barbecues with your family. It’s easy to get wrapped up in the fantasy of it all, but just be sure you’re able to back up your visions with reality, too.
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