6 Essential Tips for Buying a Vacation Home

The last few years gave homeowners a lot of questions to think about besides the realities of quarantine. For example, does the kitchen really count as a home office? Is the bedroom really the best place for a Peloton bike? 

As the post-pandemic idea of normalcy sets in, thoughts amongst homebuyers of upgrading to a bigger home or buying a new one have been on the rise, and so has the demand for vacation homes. 

Working from home is a new and, possibly, permanent reality for many people. So the prospect of working from home by the beach or with mountain views and a creek has gotten more enticing for aspiring owners. But investing in a vacation home comes with its own set of troubles, and buyers who approach the purchase fully prepared can avoid potential financial pitfalls in the future.

Below, we've put together six tips to help buyers navigate a vacation home purchase.

Tips for buying a vacation home

• Save carefully and consider all expenses
• Make sure the location fits your needs
• Hire an agent with local expertise
• Be wary of insurance costs
• Make a plan if you want to rent out your property
• Make your vacation home more affordable with a rebate

Save carefully and consider all expenses

Homebuying has been a challenging environment as of late. Many significant markets are scarce on inventory, and homebuyers face brutal bidding wars while shelling out offers significantly over the asking price.

While there is hope that vacation home markets are more niche and therefore not as competitive, the trends show that demand is rising even for vacation homes. If you want to be ready to secure the ideal second home, the first thing you should do is save early and anticipate all future expenses.

Start by determining a budget and plan to shop below that price. The chances are that you will have to offer more than the asking price. Knowing that your budget can allow for that will leave you in a comfortable position to negotiate. 

Unless you plan for it to be your primary residence, a vacation home requires upkeep and maintenance. Do the research on what kind of upkeep is necessary for the vacation home you want. 

A house that will remain empty through a cold winter will have its own set of expenses to maintain, while a year-round hot climate has its own effect on a home. Listing costs and getting an idea of what the overall number will look like can save you from backing out of a transaction at the last minute.

Make sure the location fits your needs

When it comes to vacation homes, location is a crucial factor. And that does not just mean the unobstructed view of the Olympian Mountains in Seattle or a short path to Moonlight Beach in Encinitas.

The security of the area is just as crucial as its appeal. Since you might be absent from the home for long periods, it helps to know that your home is situated in a safe area. 

Get to know the area inside and out. If this will be the place where you go to get away from it all, you want to be sure you visit the area and are excited about it. Many vacation homes are close to popular tourist spots, and the atmosphere can get hectic. Try to thoroughly explore the locale and visit it multiple times before purchasing a home. 

Hire an agent with local expertise

Keeping tabs on your budget and poring over all the listings coming your way is an exhausting process. The prospect of spending precious time just to scout out the area and know every tiny detail might be a daunting prospect.

Hiring an expert agent can help ease the burden. The prep work required from you would be to interview buyers agents and make sure you hire someone who has local expertise and a number of closings under their belt.

You can normally rely on an expert’s advice about the area and mine that knowledge for everything you want to know about the area. They will also be an invaluable resource when you examine asking prices on homes. An experienced agent will have knowledge of past sales in the area and will guide you to properties that justify the price they ask for.

Be wary of insurance costs

Any home requires insurance coverage, but vacation homes can be more demanding since the location you choose can dictate what kind of coverage you should get.

Many popular areas in California, such as Del Mar or Coronado, face the risk of erosion and other natural circumstances that can lead to home damage. Properly insuring your home is a worthwhile investment that pays off in the long run, but it is also an added expense to consider when purchasing a vacation home.

Adding earthquake, fire, and water damage insurance can quickly add up to a monthly cost of hundreds of dollars. But the tradeoff is peace of mind that you will be completely covered in case of any natural disaster. Get an understanding of overall insurance costs in the area when you are deciding on the location, 

Make a plan if you want to rent out your property

Buying a vacation home has always been a two-fold investment for owners. Besides enjoying your slice of paradise by a beach or mountain range, owners of a vacation home can benefit from a secondary source of income.

Renting out the home may seem like an ideal way of letting the property pay for itself, but there is a caveat when it comes to renting out a vacation home, and there are multiple things to consider before you commit to that plan. Transitioning your property from a second home to an investment property means higher interest rates on the mortgage.

There are also many logistical things for maintaining the property to a specific standard. If you plan on moving forward with renting it, consider how you will manage the property while off-premises and what the costs will entail. Explore how much a property manager might cost you and the daily maintenance costs of upkeep of a rental property.

Make your vacation home more affordable with a commission rebate

Going through a home purchase, even for a vacation home, can be grueling. The closing costs alone significantly impact the savings you set aside for the transaction. But working with a brokerage that offers a commission rebate can help you offset those costs and jumpstart the furnishing of your new vacation home.

Modern, tech-enabled brokerages such as Prevu Real Estate have unlocked significant savings for buyers via a homebuyer rebate or commission rebate. Traditionally, the listing agent splits the six percent commission with the buyer’s agent. Prevu returns a portion of the buyer’s agent portion of the commission back to the buyer in the form of a rebate.

Buyers can take advantage of this rebate to help offset the high closing costs or bolster their savings to start furnishing their new vacation home.