You’re on vacation, finally unwinding and relaxing after a few days and think, “We really should do this more often.” Or perhaps you’re driving to the same ski resort each winter weekend, wondering why you’re spending so much on hotels. Or maybe you are retired and thinking of a get-away during the cold Colorado months. There are lots of reasons people want second homes. Wherever your motivation is, here’s advice to consider before purchasing one:
Don’t buy impulsively
We all can get a bit carried away while on vacation and being away from everyday reality. Timeshare sales people know this, which is why they often pressure guests at resorts. Don’t fall into this trap or in general make a rash purchase decision. Instead take the time to evaluate your needs, long-term goals and budget considerations before making your purchase.
Decide on the type of home and type of homeownership
A single family home is often appealing in a privacy and space sense, but requires much more maintenance and a larger upkeep budget. While not as charming, a townhome or condo offers lock-and-leave ease. If you just want a place to use a couple times a year, you may want to consider fractional ownership or co-ownership. If you’re planning on your second property eventually being your retirement home, then you’ll need to consider what you’ll want as you age, such as less stairs, a first story master and/or an attached garage.
Research rental abilities
If you want to rent out your second home, you will need to research what you are legally allowed to do. All resorts, cities and counties have different rules and regulations. Some resorts require you rent out your property only through their rental agency. Some communities do not allow Airbnb rentals. You should also investigate the tax implications of renting.
Explore financing options
Second home mortgages are more stringent than first home ones. A good credit rating helps your application. It’s best to know what you qualify for before you start looking for your home.
Determine all budget expenses
In general, homeowners are often surprised by the cost to maintain a property. A good rule of thumb for a yearly upkeep budget is two percent of the home’s value. Second homes often have additional expenses. For instance, they may require hurricane, flood or fire insurance which are all fairly costly. HOA fees are another potential expense. Local residential taxes and general cost-of-living items – such as groceries and gas – should also be examined.
Examine the comps of like properties
When considering buying a property, have your Realtor pull comps on similar local properties. Obviously it’s more beneficial to buy your second home in an area that has historically increased in value and/or rental rate.
Consider the travel distance
Paradise isn’t really all that wonderful if you have to go through hell and high water to get to it. A regular weekend get-away is much more pleasant if the drive is shorter. Do you want to trek five hours to Crested Butte or just and hour and half to Breckenridge? For a second home you’ll only visit a few times a year, going across or out of the country is acceptable. That being said, direct flights are less of a hassle and will cut your travel time.
Consider difficulty of repair and remodeling work
At some point, your second home will need work done to it and new items purchased for maintenance or furnishings. How easy will this be? If your home is on an island, all items will have to be brought in by boat. If you buy a villa in Italy, you’ll have to go through all the local regulations for repairs that will seem frustrating complex and slow by American standards.
Explore community year-round
If you visit a place during it’s best season, you may have an unreasonable expectation for the rest of the year. For instance, beach destinations often have rainy and buggy periods. Visit a place off-season when the tourists aren’t around to see how much you really like it. Even paradise isn’t perfect!
Second home facts
– Median age of buyer: 46 (baby boomers own 57 percent of all second homes)
– Median household income: $99,100
– Median price of second home/non-primary residence: $211,000
– Number one reason for buying: Family retreat
– Number two reason for buying: Future primary residence
– Most popular location to buy: The South
– Second most popular location to buy: The West
– Most popular type: Detached single-family homes, followed by townhomes and condominiums
– Most popular area: Suburbs, followed by small towns, urban areas, resort and vacation areas
Source: National Association of Realtors®.
By Karen Libin, KL Realty. Karen is the owner and managing broker of KL Realty, and has more than 29 years of experience in the Boulder County real estate market. Contact Karen at KL Realty, call 303.444.3177, e-mail firstname.lastname@example.org or visit klrealty.net.