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Think Vacation Homes Are Only For Other People!?

December 4, 2019  /  Budgeting  /  Marti Reeder

Think again!

We’re seeing an increase in interest in second homes in our market. This interest is being driven by two main groups – millennials who fear they can’t afford a home in the area they want to live in (but who want to own something), and established homeowners who are wanting a second home for one of several reasons.


Millenials and Gen-Y. Instead of buying a starter home in an expensive area such as Seattle, many urban-dwelling millennials are renting an in-city home or apartment and buying a residence in the country or a semi-rural area.

Gen-X and Baby Boomers. These groups already own their home but have accumulated enough resources to be able to indulge their desire for a second home. Often, these are in outlying areas or resort areas. And for some owners who live outside the city the reverse is true – they are purchasing small homes or condos and coming into the city for vacations! This group may be considering a vacation home for their personal use now, for rental income, or as their future primary residence.

Having a vacation home is a dream for many people. Regardless of which group you fall into, here are some things you should consider before investing in a vacation home.

  1. How much time will you really use the vacation home? Most vacation home buyers overestimate the time the home will get used. We’ve found that vacation homes located within three hours of your current home are more likely to be used than those further away.

  2. Will owning a vacation home restrict your ability to take other vacations? If so, are you (and your family members) okay with that? If not, you may want to rethink committing to a vacation home.

  3. If you are imagining that your vacation home may turn into your future home after retirement, will it truly meet your needs at that point in time? Are the amenities and services you’ll require available at or convenient to the vacation home?

  4. If you are considering renting the vacation home out while you’re not using it, have you looked into the tax implications of doing so? If not, it’s a good idea to speak with your accountant or financial advisor.

  5. Do you want to afford it? On paper, you may be able to afford it. But a second home has all of the costs (and responsibilities) of a primary residence – and sometimes more. Be sure you’re willing to pay the price! The initial purchase price is only part of what you’ll spend on a vacation home. There are utilities, property taxes, insurance, the cost of furnishings, and perhaps HOA or condo fees. Add to that the cost for recreation – golf fees or ski lift tickets, for example – or even recreational equipment you’ll want to have on hand (boats, snowboards, kayaks, ATVs) and you’ll see how quickly that can add up.

  6. Think about security issues and protecting your investment. Vacation homes in remote areas are at risk for theft. And remote areas can create additional risk when it comes to natural disasters, such as wildfire. A simple water leak, in a home not regularly lived in, could have horrible consequences.

If your vacation home will be rented out when you’re not using it, here are a few additional ideas to ponder.

  • Know the rules – all of them. Many communities strictly limit your ability to rent out the property. The time to discover this is before you make an offer – not once it’s too late. Do your due diligence to ensure you can use the property in the way you intend.

  • Be realistic about what you will “earn”. Demand for rental properties can fluctuate wildly. Plan for the worst-case scenario. And don’t forget about costs such as between-tenant cleaning, property management, and advertising. These will all eat into your profits. If you’re doing your own advertising (rather than having the property in a rental pool) you’ll need top-notch photography and video work to showcase your home.

  • Those pesky taxes. Rental income is taxable. And you could owe taxes to the municipality you’re in as well. Depending on the length of the rental, you could be required to collect lodging taxes!

Properly planned for, owning a vacation home can be wonderful experience. Our clients who have made the leap into vacation home ownership have been happy they’ve done so.

If you have more questions or are ready to start your search for that perfect vacation home, we’re here to help. Let’s schedule a time to put together a plan to find that perfect spot for you!


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