The new decade is here — have you firmed up your next money moves? You might have decided you’d like to enjoy life by the pool, lake or mountainside — or wherever a vacation home destination might take you.
Here are a few questions to consider so you know whether a vacation home fits your plans — and who knows? Maybe it’ll turn into a permanent settlement as soon as you hang up your briefcase and launch your retirement.
1. Is A Vacation Home A Smart Investment?
Oh — that’s the No. 1 question. Will a vacation home be financially advantageous down the road? Help your heirs when you die? Bring in some income on the side as a part-time rental? Obviously, there are a lot of questions you’ll need to ask yourself. But the most important thing you can do is to put dollars and cents down on paper and total out whether a vacation home will get you exactly what you intend to get out of it.
How do you plan to buy it? Are you planning to cash out $200,000 of your 401(k) and pay for it that way? Or you might have painstakingly saved and will pay cash for the property — many experts recommend this approach. Remember, you have to make sure you’re 100% taking care of your retirement, too.
Here are a couple of other serious questions to consider:
- Is my primary home already paid off?
- Do I have an emergency fund in place?
- Am I prepared to take care of extra expenses, like a leaky roof or broken HVAC system? (Don’t forget about homeowners insurance and utilities, internet, cable and more.)
You might want to assemble a trusted team, complete with a real estate agent, financial advisor and tax advisor to help you answer some of these questions.
2. How Do I Pinpoint The Best Place To Buy?
You’ll obviously want to make sure that where you’re searching matches up to your lifestyle. If you’re a beachy person, obviously central Ohio may not be the best place to buy a vacation home. But if you’ve always been at home in the mountains, Kalispell, Montana, could make a lot of sense.
Is the area in burgeoning real estate market and you’ve done an in-depth review of the neighborhood? Understand whether you’re investing in a noisy spring break paradise or a snowbird haven. That could make a difference in your resale down the road. And if you plan to target Airbnbers, make sure you’ve chosen well. A great location will only help you down the road.
3: Is This The Right Time In My Life To Buy A Vacation Home?
It’s not tough to come up with a few scenarios where buying a vacation home just doesn’t make sense. For example, let’s say you have two high school students and they both play sports... all the time. Will you ever make it to your weekend retreat location? Or maybe you have plans to help those high schoolers pay for college — and your money will need to go that direction instead.
Evaluate whether you have the freedom and cash flow to make your vacation home happen at this point in your life. You might not have to say good-bye completely — just until a later date.
4: Do I Know All The Rules?
Do you know everything there is to know about local fees, taxes, commissions, zoning and property rules? There may be restrictions for doing a short-term rental in your community, neighborhood, town or state.
For example, let’s say you want to buy a vacation home to function as a short-term rental in Sonoma. You’ll be out of luck, because the town of Sonoma doesn’t allow short-term vacation rentals. You’ll need to screech the brakes and check out other options.
In other words... do your research! A great real estate agent should help you suss out your options.
5. Is A Vacation Home The Best Move For Me?
Have six of your 10 neighbors caught the vacation home bug? You might make decisions based on what you’ve read online or go off of Neighbor Jed’s advice. Or you might think a vacation home makes sense for you.
Here’s the truth: You could lose money if you don’t determine exactly whether all the jigsaw pieces fit your lifestyle.
Be A Professional In The Vacation Home Real Estate Game
Be as objective as possible when you search for a vacation home. In other words, approach the idea as if you’re not the one getting a vacation home — pretend someone else is. Have a precise method you’ll approach (using all the experts you have in your back pocket) to determine whether you have what it takes to make the best vacation home decisions in 2020 and beyond.
See more from Benzinga
- 5 Money Questions To Ask Yourself Before You Retire This Decade
- 11 Expected (and Unexpected) Ways You'll Save Money as an Empty Nester
© 2020 Benzinga.com. Benzinga does not provide investment advice. All rights reserved.