The thought of shopping for vacation homes for sale is exciting. You dream about having a home away from home where you can retreat for a long weekend or for a spontaneous getaway with friends and family. Before you start looking for your new Cascade Idaho real estate property, there are a few key questions you’ll want to ask yourself that will help you determine if you’re in a good position to move forward. Answer the following questions, and you’ll be prepared to take the next steps with greater confidence about what’s ahead.
What’s your financial situation?
Unless you have enough cash on hand to fund your entire purchase, you’ll need to work with a lender to secure financing. In many ways, this process is similar to when you purchased your first home. You’ll need to share information about your current debt-to-income ratio, and you’ll probably have to provide recent tax returns or pay stubs to serve as proof of income. You’ll find that lenders sometimes charge higher interest rates or require larger down payments for second home and investment property purchases. If you want a better chance at securing a lower interest rate, you can use a larger down payment, or you can take steps to raise your credit score before applying for a loan.
How familiar are you with the current state of the local housing market?
Can you handle the responsibility?
In many ways, a home is a living and breathing organism. You can’t let a home sit idly and expect everything to remain the same each time you return. You’ll have to care for and maintain your vacation home in the same way that you often have work to do in your primary home. Many owners of vacation property choose to outsource these tasks to a general contractor or property manager. This is especially helpful if you spend the majority of your time elsewhere. Your property manager can keep an eye on the property while you’re away and take steps to prepare the home for changing seasons and upcoming storms.
What kind of home are you looking for?
Size, location, and layout are all important concerns here. Think about how much space you need to have inside your home. Will it be just a place for you and your immediate family, or do you hope that it will be a gathering place where you can host multiple families or several of your friends at the same time? You may also prefer to have a home that’s in a specific location close to key amenities and services in town. You’re buying a vacation home for the enjoyment that it will provide. Make sure you can enjoy every aspect of the home that you’re choosing to invest in - including its location.
How will you raise your ROI?
Perhaps you’re purchasing a vacation home solely for personal use. If so, this section will be less relevant for you, although you may still want to take on various home projects and renovations that will raise the value of your property. An upgrade, such as an expanded outdoor living space, will be something that will raise your home’s value while also providing you with an additional amenity to enjoy while the home is yours.
Many owners of vacation homes are interested in listing their home as a short-term rental during the times when they are staying elsewhere. This can be a great way to generate passive income on the property while maintaining the ability to come and stay in the home whenever you like. Platforms such as VRBO and Airbnb will allow you to rent out your home to tenants on a nightly basis.
How will this affect your taxes?
If you choose to rent out your property on the nights when you’re staying elsewhere, you’ll have other tax ramifications to keep in mind. You don’t have to claim the income if you rent your home for less than fourteen nights in one year, but you cannot claim any other deductions besides what was discussed above. Once you rent the home for fifteen nights (or more) in a single year, you’ll need to report the income, but you’ll also be able to claim other expenses related to maintaining your rental property. This includes any salary you pay for a property manager or communications assistant, along with home utilities and repairs on a prorated basis.