Let’s face kit, the daily grind of balancing our commitments to our work and family can all get a bit much at times. By the time we’ve finished a day’s work, cleaned, cooked, put the kids to bed and (maybe, if we’re feeling super duper dedicated) hit the gym, we can find that it’s time to hit the sack and repeat the whole thing all over again tomorrow. It’s around this time of year when the sun decides to peak behind the veil of clouds that our thoughts turn to getting away for the summer. After enduring week after week of arduous labor both at work and at home, what could be more appealing than the thought of sunning ourselves on a sandy beach, immersing ourselves in another culture, sampling (a lot of) different foods, sampling one or two (dozen) cocktails and enjoying the lush topography of some faraway land. Travel is not just a relaxing and enjoyable pursuit for us, it’s also extremely edifying and instructive for our kids. It broadens their horizons, opens them up to new experiences, people and cultures and helps them to engage their learning and creative problem solving skills on a regular basis, whether they’re aware of it or not. Whether you’re going international, interstate or just “inter” the next town over, travel represents an exciting break from the norm.
Home away from home
While most of us are more than happy to stay in hotels, hostels, guest houses and lodges when we go away, it’s perfectly understandable that some crave something more. They want a home away from home, a place where they can enjoy the benefits of travel with the familiarity of home. It’s for this reason that many of us consider buying a vacation home. After all, such a purchase would offer us the best of both worlds, and offer us a level of familiarity and consistency that you tend not to get especially when booking package vacations. You may think that such a purchase is beyond your household income or may be an unnecessary drain on your finances whenever it’s not in use, but a holiday home is actually a very prudent investment. Sure, ponying up for a down payment may not be easy, but if you can scrape together enough to get your vacation home up and running, your vacation home can be a much higher yield investment than a buy to let property. Not only could your vacation home offer you all the comforts of home in a more exotic locale, it could be a real money spinner when you’re not using it. Like any purchase it can either be a really really good idea, or a really really bad idea. The difference is whether you do it right or not. Here we’ll look at some of the pros and cons of owning a vacation home and look at how to do it right to make sure that you get more pros than cons for your investment…
Staying in a hotel is great fun. There’s no feeling quite like checking in and gazing at awe at the classy decor and the cutting edge amenities of the room and communal areas. But when the bells and whistles lose their luster, many wind up feeling homesick. We miss the sense of freedom and personality that our home offered us. After a while, the hotel room seems a little too anonymous for us to be truly comfortable there. A vacation home you can decorate as you want, you can invite whoever the heck you want over for dinner and drinks and you can stay up as late as you like and make as much noise as you like without waking the guests in the next room (whose late night *ahem* frolicking won’t be keeping you up late at night or psychologically scarring the kids either). You may even want to retire to your vacation home some day, and enjoy a life of relaxation and luxury in your later years. You also have a lot more room to play with than your average hotel room and you only have to unpack once. While you’ll likely want to visit restaurants and cafes in your chosen location, if money gets tight you know that you can cook and prepare your own food should you so desire. An option that’s rarely available to you in hotels.
When not in use, your vacation home could be a steadily and reliable source of revenue. While you may not be able to keep an occupant in there every week, you’ll enjoy a larger weekly sum than you would if you were renting to a buy to let tenant. If it’s close enough to your home you’ll be able to clean it yourself between stays, but if not you’ll find the irregular cleaning costs fairly negligible. A vacation home may have certain tax advantages too, especially if you’re buying domestically. If you’ll be making money from your vacation property, the costs you dedicate to its upkeep will likely be tax deductible.
Of course, while a hotel room may lack in size and character, there are certain advantages, too. When you own your own vacation home you’ll have to clean up after yourself, and while you’ll never have to worry about getting out of the room before check out time, you will have to deep clean the place so that it’s ready for the next user. When the next user comes along, unless you’re prepared to devote a chunk of your rental income (and a chunk of your salary whether the place is occupied or not) to a management firm, you’ll need to resolve any issues or disputes. This may be problematic if your vacation home is in another state or even another country.
While the economy may be improving in a wake of the financial crisis of 2007-2008, many economists believe that we’re never far away from an economic downturn. If you should need to unload your second property at short notice you may take quite a hit on the price as the demand will have evaporated, leading to a steep drop in prices.
Doing it right
The most essential aspect of doing it right when it comes to buying a second home is choosing the right home loan or mortgage. Depending on where you buy, some mortgage options may be better than others. If you’re buying internationally, for example, you may find that your choice in location makes a huge difference not only in terms of what kinds of mortgages are available to you, but in any tax advantages or administrative fees come with investing in a property from overseas.
Thus, it’s vital that you do your homework on the area in which you want to buy. See how much similar properties go for and use that to extrapolate what you can expect to make in and out of season. If you can, do your homework on the property itself, making sure that you won’t have any nasty surprises later on down the line when you’re too far away to address them directly. It’s also important to make sure that your vacation property is adequately insured not just to protect you and your family, but any holiday makers who may use it. While the chances of them incurring huge damages to the property accidentally may be pretty slim, it’s not a situation you want to be unprepared for.
If you visit a certain area frequently and want to make memories there with your family and friends for the rest of your life, a holiday home may be a great investment that works out cheaper than staying in hotels and lodges every time you visit. If you do your homework and choose your area and property carefully, there’s no reason why your vacation home can’t bring you joy all year round, every year.