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It’s been a goal for decades—a vacation home—and now it’s time to realize that goal. And while you should absolutely seize this opportunity, there are a lot of details to figure out before buying a vacation home during retirement. Here’s what you need to know about owning a vacation home from start to finish.
The first question anyone should ask before buying a vacation home is, “Can I afford it?” Your vacation home may be smaller than your primary residence, but if it’s in a desirable destination it could be more expensive.
If you need to pull money from retirement savings to afford a vacation home, think twice. But if your primary residence is paid off and you have a substantial down payment for a second home, a vacation property may be within your budget.
Your cost for a vacation home includes more than the purchase price. You want to account for additional expenses in your calculations, including:
Many vacation homeowners use their property as a short-term rental to offset the costs of ownership. Renting out your vacation home can be a smart call, but don’t underestimate the time and money involved. Unless you live nearby, you want to hire professionals to manage the property for you, including a:
It’s also important to be realistic about how renting a second home affects your own use of the property. You may not be able to use your vacation home during the most popular travel weekends if your goal is to maximize rental income. Know your priorities and whether you want to use your second home as an investment or just subsidize the mortgage payment. How frequently you rent your second home also affects your tax obligation.
Whether you rent out your second home or leave it vacant, you need extra security to protect against vandalism and burglary. Vacation homes are susceptible to criminal activity; if burglars notice your home frequently sits empty, they’ll consider it an easy target for property crime.
Home security deters crime and protects you if something does happen. A monitored security system is best because it notifies authorities automatically if a break-in is detected. Self-monitored systems require you to react and call for help instead.
Up-front costs and monitoring subscription fees vary widely for home security systems, so research home security systems and set a realistic budget based on your security needs. Keep in mind that a strong security system may get you a cheaper rate on homeowners insurance.
These are other security features to consider for your vacation home:
This article covers how to keep an eye on your vacation home from afar, but what about when something goes wrong? It’s easy to keep up on maintenance when you live in a home and notice every strange noise, but problems in a second home easily go undetected. And the longer a problem sits, the bigger it can grow.
Proactive maintenance is necessary to prevent your vacation home from turning into a money pit. Start with listing your home’s major systems and when they’re due for service. Then, prepare for minor repairs by screening handymen now—before you need one. That way you know exactly who to call when something goes wrong and can trust that you’re getting a fair price. You can find handymen—as well as cleaning services and landscapers—at online sites, such as Home Advisor and Angie’s List.
If you can’t get your eyes on your vacation home on a regular basis, hire someone else to manage maintenance. Many property management agencies include inspections and maintenance coordination in their service plans. Before taking a hands-off approach to second home maintenance, double-check your contract. If you think maintenance is covered and it’s not, you could be in for an expensive surprise.
Owning a vacation home in retirement can be an amazing reward after decades of hard work. But if you do it wrong, it can also be a major burden. Before investing in a vacation home, make sure you understand what you’re signing up for, from the mortgage payments to the maintenance. As long as you’re prepared for the realities of owning a second residence, buying a vacation home could be the best choice you ever make.
Just like with your primary residence, you’ll likely need a mortgage for your new vacation home. You can look at mortgage loans right here on Credit.com and use the Credit.com mortgage calculator to investigate options for different loan rates and terms.
You may also want some helpful advice if it’s been a while since you took the plunge on the loan for your current home. You can find helpful articles in the Credit.com Mortgage Resource Center, including a look at how your credit score affects your mortgage.
About the Author
Jim McKinley is a retired banker with almost 30 years of experience. He created MoneywithJim.org to share his advice and other resources on a variety of financial topics. In his spare time, Jim spends time with his family and his dogs and he maintains his website. It’s a very lovely life that he’s grateful for every day.
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