A home is one of the most significant purchases you’ve made in your lifetime, so you should take your time when thinking about buying a second one. Many people have a favorite vacation spot in a scenic area, but they can’t spend a significant amount of time there until they’re retired. If you’re thinking about buying a house in such a spot, you have three big things to think about before purchasing your vacation home.
Will You Eventually Move There?
First, you should consider what the primary purpose of the second home is going to be. Think about your long-term goals and if you would eventually like to make the vacation house your primary residence. Is it a place for your family to gather? A place for you to enjoy a particular natural landscape? Is a big retirement move right for you, or is it just a place to visit occasionally? If you don’t expect to occupy it for more than a small portion of the year, you might want to look into if it could pay for itself. If it can’t, the cost and labor associated with maintenance could defeat the purpose. Assess how much of your time the house will take up and consider if that will make it more of a burden than an asset.
Will You Rent It Out?
If you’re buying a second home as an investment, research how easily you can rent it, how it might appreciate or depreciate in value in the future, and the laws surrounding using real estate as an investment. For example, second homes in vacation destinations tend to be less susceptible to economic fluctuations, so don’t forget the classic piece of advice that real estate is all about “location, location, location.” A unique residence in a desirable location can make for a great investment.
What’s Its Value?
Since a second home requires a big financial commitment, you should look into how easy or difficult it would be to liquidate and if you think it will appreciate in value over time. If your financial situation changes and you need to sell, consider the desirability of the property. Remember that if market volatility forces you to sell, you may not be alone, which could affect prices and demand.
If you think a vacation home or second home is part of your retirement plan, contact us before making the big decision. We can help you assess your financial situation and weigh the pros and cons. Sign up for a complimentary financial review to talk to us about your lifestyle goals for retirement. We tailor each retirement plan to the individual, and what you want your retirement to look like is paramount.