Personal Capital Vacation Home Buying Guide

22 Pages·2017·1.43 MB·English

VACATION HOME
BUYING GUIDE
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Table of Contents
VACATION HOMES – A LIFESTYLE CHOICE 03
IS A VACATION HOME RIGHT FOR YOU? 06
> Assess Your Finances
> Evaluate Your Long-Term Goals
> Understand the Current Market
VACATION HOME PURCHASING STRATEGIES 09
> The Types of Vacation Homes to Consider
> The Importance of Location
> Future Expansions on Vacation Homes
> Remodeling & Renovations
> Beware the Timeshare
VACATION HOME FINANCES 16
> Vacation Home Loans
> Tax Considerations Around Vacation Homes
> The Share-Economy
Please note that this guide will focus solely on U.S. vacation homes. If you are interested in purchasing a vacation home abroad, there will be different lending and
ownership rules depending on the country, and you will want to consider country and currency risk. Consult a financial advisor for more information.
Vacation Homes
A LIFESTYLE CHOICE
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emoh nac yle kil tse ta taht htiw pihs renw o semo c a tol fo , stif eneb tub s ’ti t on tuohtiw
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siht epyt fo elyt s e fil tnemt s e v ni stif o tni ruo y laicnanif snalp dna gnit s e v ni . yge ta rt s
fI e r ’uo y gniredisno c gniyub a noitaca v ,emoh l’uo y tna w o t redisno c la re v e s sro tca f taht
nac tca pmi ruo y .noisiced
GOTLEARN MRGBURN 2017 VACATION HOME BUYING GUIDE p3
A� GE� TBI � EB H � CBAG� �
oD I e v ah eht emo c n i dna st e s s a yra s s e c e n
o t yub a dno c e s ? em o h There are myriad costs
THE PROCESS
associated with vacation home ownership that
aren’t all upfront costs.
ev aH I thgu o h t tuo b a eht se c n a n i f o t - m o c c a Assess your finances & reasons
etad o m gni l e v a r t o t dna mo r f eht ? e s u o h for purchasing a vacation home
If the property isn’t local, there can be costs
associated with getting to the vacation house
Decide where you want to buy
and back home.
and what kind of home you want
to fit your needs
sI siht ylu r t eht noi t a c o l e w tna w o t dne p s
ts o m fo ruo ? em i t Even if you use the vacation
home regularly, you can sometimes feel bound Establish a budget so your
purchase isn’t a financial burden
by the place you’re investing in.
oD I e v ah a laco l ? rte p x e Local experts can give
Engage a local expert in the
you the scoop on the local market, as well as
market where you’re looking
other considerations you might not think of.
woH dlo ma ?I If you have kids at home ver- Shop around - a good rule of
sus in college, this can factor into your decision thumb is to view 8-10 properties
before committing
regarding free time to devote to a second home.
tahW dni k fo sei t i v i t c a od I ? y oj n e Where you
Enjoy your vacation home!
decide to purchase a home can be influenced by
what activities you would like to do.
woH de t t i m m o c ma ?I You may think about NOTE: This guide will focus on buying a vacation home, not a
renting for a couple of years in the location second property as an investment. As always, you should consult
a professional before making any kind of vacation home buying
you’re interested in before making a long-term decisions.
commitment.
GOTLEARN MRGBURN 2017 VACATION HOME BUYING GUIDE p4
ASSESS YOUR FINANCES
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eb a esiw mre t - g n o l noi s i c e d ro f .uo y e re H e ra emo s sno i t s e u q uo y nac ksa fle s r u o y o t ple h
eni m r e t e d reh t e h w ruo y lai c n a n i f e ru t c i p srto p p u s sih t :e s a h c r u p
1. How strong is your income? gniru D 4. Do you need to finance the vacation
na cimo n o c e ,nr u t n w o d eht noi t a c a v property? gnit e G a egag r t o m ro f a
yrte p o r p t e k r a m si yl a c i p y t eht ts r i f noi t a c a v p o r p e r t y c a n b e d i f f i c u l t .
o t t eg ,ti h dna ti ne t f o s re f f u s eht B a n k s ae r q u i et s t r i c t o n l i m i t i n g
ts eg g i b sen i l c e d sa .l e w gni r u D lai c n a n i f b o r o w e r r s of r a va c a t i o n yrte p o r p o t a
, s e s i r c elp o e p t on yln o re f f u s y a p , st u c 24 e m o c n o i %i - t o a t r - tr o b e d . s s e l
y eh t y am osl a es o l rie h t sbo j dna e ca f
luf t c a p m i sti h o t rie h t tne m t s e v n i 5. Do you plan to own your vacation
.soil o f r t o p home for at least five years? ne viG
eht hgi h noi t c a s n a r t st s o c de t a i c o s s a
2. Does your vacation home have rental htiw gni y u b , yrt e p o r p uo y y am tna w o t
income potential? latne R emo c n i nac eb nw o ruo y noi t a c a v emo h ro f sa gno l sa
a tae r g y a w o t rto p p u s eht gni o g n o ts o c .el b i s s o p fI uo y w on k e re h w uo y tna w
f o gni n w o a noit a c a v yrte p o r p gni r u d o t e ri t e r dna e ra de t s e r e t n i ni a tne r r u c
eht s ke e w uo y li w t on eb .e r e h t ehT SRI noi t a c a v emo h ni sih t ,no i t a c o l gni y u b a
s w ol l a uo y o t tne r tuo ruo y emo h ro f pu tne m e r i t e r yrte p o r p sed a c e d ni e cna v d a
o t 1 4 sy ad a rae y tuo h t i w gni y a p se x a t thg i m t on yln o gni r b suo d n e m e r t lat i p a c
no eht lat n e r emo c n i de t a r e n e g m o rf ,no i t a i c e r p p a tub osl a e vi g uo y a e cal p
es o h t ;s y a d , re v e w o h re t f a 1 4 sy ad uo y e re h w l’ u o y e v a h yda e r l a dia p n w od
tsu m mia l c eht . e m o c n i ruo y . e g a g r t o m
3. Are you maxed out of your mortgage 6. What is your current asset allocation?
indebtedness? ehT SRI se t a t s uo y nac neh W eht lai c n a n i f sis i r c ,ti h eht ega r e v a
e ti r w f f o a mumi x a m f o 1$ noil l i m ni nac i r e m A w as rie h t t en hrto w ylt a e r g
ega g r t o m s s e n d e t b e d n i nee w t e b ruo y de t c a p m i esu a c e b yrte p o r p de t n u o c c a
yra m i r p dna dei f i l a u q yra d n o c e s .em o h ro f a eg ra l yti r o j a m f o .ti eli h W hca e
fI uo y e ra yda e r l a dep p a c tuo hti w a s ’ no s r e p ksi r e cn a r e l o t si ,tn e r e f f i d s ’t i
1$ noil l i m ro re t a e r g ega g r t o m no ruo y yl a c i p y t t on a tae r g aed i ro f eno y n a o t
yra m i r p , em o h uo y nac on reg n o l e ti r w e v a h e ro m nah t 05 % fo sih ro reh t en
f f o ruo y noi t a c a v yrte p o r p ega g r t o m o t hrto w ni y na elg n i s t e s s a , s s a l c yll a i c e p s e
ruo y .em o c n i tuB fi uo y tne r tuo ruo y o n e w h e e r l eve r a g e i s er q u i e r d .
noit a c a v , yrt e p o r p uo y e ra elb a o t tcu d e d P o r p e r t y si eno f o eht tsa e l diu q i l
eht ts e r e t n i sa na esn e p x e f f o ruo y lat n e r tne m t s e v n i . s e s s a l c uo Y nac w ei v ruo y
.em o c n i esU elu d e h c s A o t e ka m eht t en hrto w gni s u lan o s r e P s ’l a t i p a C ee r f
, sn o i t c u d e d dna ee s eht SRI ro f e ro m lai c n a n i f . l o o t
. s l i a t e d
GOTLEARN MRGBURN 2017 VACATION HOME BUYING GUIDE p5
Is a Vacation Home
Right for You?
WHAT TO CONSIDER WHEN BUYING A VACATION HOME
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e zilitu ruo y noitaca v . repo yt rp
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EVALUATE YOUR LONG-TERM GOALS
If you’re looking to capitalize on your vacation home investment, you are likely wanting
to make a return by renting, selling, or retiring at the property. Therefore, it’s important to
know ahead of time whether you are buying a vacation property for a better lifestyle, to
make money, or a little bit of both. Some good questions to ask yourself include:
BNDHB� UHNE �
How often will you use the property yourself?
CA� CEUHUBON
Do you want to spend the majority of your
UTHC� M AHUUCTNI time in the same place, or would you like
to stay on the move for your vacations?
Do you want, or need, rental income to offset
TCNU AOUCNUBHM
costs when you’re not using the property?
ATOACTU � Have you considered property appreciation and the
HAATCEBHUBON need to offset maintenance costs over time?
Is there a possibility you will retire at this property,
U� T� C AMHNI
or live there full time in the future?
ACTIONHM EHABUHM BNIB�DU
A real estate agent and lender can give you expert advice on lifestyle investments
like vacation homes. Real estate agents will help you find homes, clarify local trans-
action fees, taxes, and commissions, and advise you on local zoning and rental rules.
Loan advisors will help you analyze your options and determine which loan options
you are eligible for given your employment profile, and which is most efficient from
a budget and tax standpoint. You also can talk to a registered financial advisor to
discuss how this type of lifestyle investment fits into your overall financial strategy.
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UNDERSTAND THE CURRENT MARKET
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lae r .e tat s e
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gnino z , segnahc dna .e rom gnikro W htiw na tnega elbaegdelw onk ni eht ae ra e r ’uo y rolpx e -
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si osla yle kil o t lac noitne ta o t sme ti taht laitne t op dno ce s emoh sre yub y am tcelgen o t ksa
,tuoba e kil eht den ro f dna ( tso c )f o dolf ro enaciruh ,e cna rusni ro f .elpma x e
CURRENT STATE OF THE UNION
> According to the National Association of Realtors, vacation home sales cooled off a bit in 2015,
but remained the second highest they’ve been in nearly a decade. Sales in the United States
last year were at an estimated:
920,000
201 6 SU EMOH S E L A S
18.5%
down from their most recent peak of
1.13 million in 2014. Vacation-home
buyers in 2015 had a median house-
hold income of $103,700. Buyers plan
to own their property for a median
of seven years.
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Vacation Home
Purchasing Strategies
WHAT KIND OF HOME SHOULD YOU BUY, AND WHERE?
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aedi fo a noitaca v .emoh
GOTLEARN MRGBURN 2017 VACATION HOME BUYING GUIDE p9
EUG EC�G� B� NHMHETBI UBYG� EB MBI�T�G�
What kind of place best suits your vacation needs?
There are several types of properties to consider, all with their own advantages and draw-
backs. We’ve reviewed some of the more popular types of vacation homes:
Waterfront Houses
T he beach! There can be a lot of red tape
regarding waterfront property
Likely to be easier to find tenants if changes, e.g. docks or seawalls
you decide to rent your vacation
I nsurance requirements can be
home - and justify higher rent rates
lengthy and expensive
P otential for higher ROI W eather elements, such as sea
air erosion or tropical storms, can
A multitude of water activities, greatly impact your property
such as swimming, boating,
water skiing and more Waterfront properties can be
more expensive and lenders tend
to work only with very qualified
buyers
Mountain Cabins/Ski Condos
E asy access to amenities, such as I n rural areas, utility services
skiing, hiking, biking, and state/ may not be readily available at
national parks the property
Beautiful views and access to nature, Weather elements, such as
wilderness and fresh air snowfall and winter storms, can
greatly impact your property
P otential access to larger acreage
at a lower cost than other types of Many cabins are on county-
homes maintained roads, which aren’t
always maintained well
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