When asked what people are most looking forward to in retirement, most respond with something in the realm of traveling or vacationing. Many retirees have a strong desire to maintain their current home, especially if they are connected to their communities, live near family, or have strong friendships they want to maintain. However, purchasing a vacation home--a place where they can fully enjoy their golden years--is a dream that many want to achieve.
Many retirees flock south to bask in the warm weather and soak up the beautiful waters. For those that want to purchase a vacation home in their favorite place, it’s important that they do their research and understand what owning property in that location can mean. Vacation homeowners also need to be aware of more than the purchasing costs, but also the costs to maintain and sustain your second home. Here are four tips from home-buying experts for retirees in the market for a vacation home.
Tip #1 Explore Financing Options
If you are living on a fixed income in retirement, it may be hard to see how you can budget for a vacation home. However, don’t give up on your dream just yet. You have several options to help fund your second home:
● If other family members will have access to the house, see if they have the means to contribute to the purchasing costs.
● Downsize your current living environment by selling your home and moving into a smaller, more affordable space, which also gives you more assets to put toward your vacation home.
● Market your second home as a rental property, such as on Airbnb or VRBO, during times when you are not using the space. Renting it out can help pay for the mortgage on your new home.
It’s important that in order to preserve your financial peace of mind during retirement, you do not get so excited about a vacation home that you commit to something beyond your means. Start out with a budget and stay firm on the price you are willing to pay.
Tip #2 Knowing What You Want in a Vacation Home
Not all vacation homes are created equal. Before you being the vacation home search, you need to understand what you want to experience in this space. Do you want to be close to the beach? Would you like to be in the middle of a throbbing, vibrant urban center? Purchasing a vacation home might be a stressful process, but once you’ve found a home, it should be a de-stressing experience. Even though you won’t live in your vacation home full-time, you’ll have to live with your choices, nonetheless.
Tip #3 Keeping Insurance Costs in Check
If you, like many retirees, buy a cottage on the beach, you may have to pay more insurance than you expect, especially if your insurance payments on your little Midwest split-level are pretty standard. For example, you will likely be required to purchase flood insurance. If you purchase a condo or a prefabricated home in a community, insurance might be covered. The location, type of property, and the belongings you keep there will all impact your insurance.
Tip #4 Be Prepared for Additional Costs
There are many financial fluxuations to deal with when purchasing a second home. From property taxes to an adjustable rate mortgage from fixing the air conditioner to keeping up with maintenance on the pool, owning a vacation home means keeping up with additional costs. If you rent out the space, you might want to consider hiring a property manager. Or, if you purchase a home in a retirement community, you may have homeowners’ association fees to cover.
For a rental, you need to factor in the cost of modifications. In order to enhance the home’s appeal, think about what guests would want to have the most during their stay. Consider remodeling the kitchen to include a full range of amenities so that guests can cook their own meals. Make sure you provide an appealing outdoor living space, including a grill and jacuzzi. If any modification is going to be a major project, don’t attempt it yourself; you should instead budget for a contractor, who can also save you money by offering bulk discounts on materials. Ask around for a highly recommended company, then let them know exactly what you want done for a more efficient job.
Retirement can be an exciting time in your life, especially when looking for a permanent vacation spot. As enthusiastic as you might be, remember to slow down and take your time. Doing research and looking to the future can help you make the best possible decision on a vacation home.