Things to Know Before Buying a Vacation Home Roger Odoardi Guest Post By: Patricia Aureli, Principal Broker and Owner, Coast & Dream Properties Are the salty breezes of the ocean calling your name? Or are the majestic mountain vistas and balsam-scented pine trees gently whispering in your ear? Whatever type of vacation location is running through your mind like a non-stop loop, before you plunk down your hard-earned cash or sign on the dotted line for that dream of a lifetime, there are some things to consider first. Have a budget and know what you can afford. This is perhaps the most important factor in preparing to purchase a vacation home. Take time to review your finances and determine what your budget is for your future property. The cost of owning a vacation home is not only what you pay for it, but also: Associated taxes, Insurance, Utilities, HOA and condo fees, Other items you may need such as furnishings or seasonal gear like water and snow skis, kayaks, jet skis, boats or other toys. There is no point in running around touring multiple properties with price tags that are beyond your reach only to discover that you don’t qualify for the purchase if you’ll be financing it. Are other family members planning to go in on the purchase with you? Make sure you have your ducks in a row and know who is actually going to be making the purchase. If you need help setting a budget, have a chat with a Blue Water Mortgage broker who can help you find great loan programs, rates and see what works best for you. Know where you want to be. What exactly do you want or expect from a vacation home? Do you want peace and quiet where neighbors are few and your privacy is a top priority? Or are you looking to be close to the hustle and bustle of a busy downtown, restaurants and nightlife? Is boat access, a boat slip or dock a must? Is proximity to a large hospital or urgent care medical office important? “Location, location, location!” is such a key factor to consider in this decision-making process because you can’t pick the property up and move it once you own it! Unless, of course, it’s a mobile home or house boat. Choose a place that you’ll visit often and that you love. Perhaps you already own a home near the ocean and are looking for a real change of scenery. In that case, a mountain top log cabin or big city condo might be the way to switch things up. Getting there. How easy or difficult will it be to get to your vacation home? Are we talking a quick jaunt up the highway or will you fly in through the nearest airport? Is train or boat access necessary? Are you willing to suffer through sitting in a traffic jam and will it be more than worth it to get there? These are questions to ask now before you decide on the location. Make sure the type of vacation home fits your lifestyle. If you are more comfortable in a small quaint cottage than you are in a luxury multi-unit high-rise condo, then narrow your search to types of properties which suit you best. If you can’t possibly survive without valet parking or knowing that there’s a back-up generator in place should the power go out, be sure you have the creature comforts important to you. Plan to relax. It may sound silly, but sometimes, planning the calendar year when you can take advantage of your new vacation home will help you relax more and enjoy it. Plus, it gives you something to look forward to. How will you use this home away from home? Do you expect to use it multiple times a year or possibly every weekend? Will this ultimately become your retirement home? Do you plan to rent out the property while you’re not using it? More on this in the next section. According to a survey done in 2015 by the National Association of Realtors®: 37% of vacation home buyers plan to use their property for vacations or as a family retreat 16% plan to convert their vacation home into their primary residence in the future 13% purchased because of low real estate prices and the buyer found a good deal 42% of investment property buyers purchased the home to generate income through renting the property 16% purchased because of low real estate prices and the buyer found a good deal 14% for potential price appreciation Don't assume you can rent out your vacation home. If you are planning on purchasing your vacation home for investment purposes and wish to rent out the property while you’re away, this may have special implications for financing. You will want to discuss this with your mortgage specialist if you are financing the property and not paying cash for it. A lender may require that you obtain an investor type of loan rather than a conventional mortgage. This may also be the case with certain types of condo units in communities where rentals are frequent. While you may not plan on renting your unit out, the lender may consider this to be a rental community. Also, it’s important to check with the community, neighborhood, town, and state for any restrictions on using the property as a rental unit. A real estate professional can assist you with getting all of the information you need to make an informed decision. Be realistic about rental income. Know what the rental market commands in the area where you plan to buy your vacation home if you do decide to rent it out. There are many factors that influence rental prices and you don’t want to come up short if you are counting on that income to offset the cost of the property. There are costs associated with renting out your property to consider such as advertising and property management. You may not be there to fix the fridge or air conditioner if it goes on the fritz in the middle of your tenant’s long-awaited vacation but it will need to be taken care of quickly. Protect your investment. There will be times when you won’t be able to break away to get to your vacation home. Life happens, but it’s never good to leave your home away from home unattended for long periods of time. You may wish to consider a security or surveillance system or a property manager that can give you peace of mind while you are away. A frozen pipe or a leaking toilet can do considerable damage in a short amount of time. If it’s in snow country, who will plow or shovel the driveway? It also helps to make friends with trustworthy neighbors so that they can keep an eye on things. Taxes are a certainty. You will most certainly pay taxes on your vacation home so why not be prepared? Review with your mortgage specialist or real estate agent what to expect with regards to property tax, but also consider consulting an accountant for any other tax issues regarding your vacation home such as selling it if you reside in another state. Some states charge buyers and/or sellers a conveyance tax when a property is sold by or to an out-of-state resident. Be prepared for company! The old adage about owning a vacation home often comes true. You may find yourself entertaining more friends and relatives than you knew you had after you close on your vacation home. Be prepared to embrace an open door policy or set limitations on guest visits and have a polite way of saying no at the ready. Also give thought to the size of appliances such as a refrigerator, barbecue grill or washer/dryer and stocking the pantry with regards to accommodating lots of company. 11) Get the ball rolling. Inventory of vacation homes is low along with other categories of real estate, and this has helped push the median vacation and investor home purchase price higher in 2015 over 2014. According to NAR, the typical price was $192,000 for vacation buyers, up from $150,000. Investors typically purchased a median-priced property of $143,500, up from $124,500. 39% of investors and vacation buyers paid cash for their property purchase while others financed their purchases. If your goal is to own a vacation property, then now may be one of the best times to jump into the vacation home market because mortgage rates are still quite low and prices of homes may continue to rise. Patricia “Pat” Aureli is the principal broker and owner of Coast & Dream Properties, an independent real estate company located on Route 1, just a mile from Drake’s Island Beach in Wells, Maine. Coast & Dream Properties serves buyers and sellers of ocean and lake waterfront, vacation and second homes. She has been a licensed real estate agent, broker and member of the National Association of Realtors® for nearly two decades. Pat says, “I’ve always felt having the property you dreamed about is important to people. My real estate team and I are here to make it happen!” Roger Odoardi Roger is an owner and licensed Loan Officer at Blue Water Mortgage. He graduated from the University of New Hampshire’s Whittemore School of Business and has been a leader in the mortgage industry for over 20 years. Roger has personally originated over 2500 residential loans and is considered to be in the top 1% of NH Loan Officers by leading national lender United Wholesale Mortgage.