It’s been a goal for decades — a vacation home — and now it’s time to realize that goal. And while you should absolutely seize this opportunity, there are a lot of details to figure out before buying a vacation home during retirement. Here’s what you need to know about owning a vacation home from start to finish.
Paying for a vacation home
The first question anyone should ask before buying a vacation home is, “Can I afford it?” Your vacation home may be smaller than your primary residence, but if it’s in a desirable destination it could be more expensive.
If you need to pull money from retirement savings to afford a vacation home, think twice. But if your primary residence is paid off and you have a substantial down payment for a second home, a vacation property may be within your budget.
Your cost for a vacation home includes more than the purchase price. You want to account for additional expenses in your calculations, including:
- Taxes: In addition to property taxes, you’ll pay higher taxes on the sale of a second home. Second homes aren’t eligible for the capital gains exemption.
- Homeowner’s insurance: This may be higher if the vacation home has a pool, waterfront, or is in a flood zone. You need additional coverage if you plan to use the property as a rental.
- Property management: If your home is vacant for long periods or you rent it out, you may want a property management agency to oversee maintenance, marketing and other logistics for you.
- Moving expenses: While it’s a one-time cost, moving is costly, especially interstate moving. Compare the cost of moving furniture against buying new furnishings where your vacation home is located. For the items, you intend to move, use a moving cost calculator to understand what you can expect to spend.
Renting out your vacation home
Many vacation homeowners use their property as a short-term rental to offset the costs of ownership. Renting out your vacation home can be a smart call, but don’t underestimate the time and money involved. Unless you live nearby, you want to hire professionals to manage the property for you, including a:
- Property manager to market the unit, handle tenant relations and coordinate maintenance.
- Cleaning service to deep clean the unit before renting it out and between renters and your own return.
- Landscaping company to maintain the exterior of the property.
It’s also important to be realistic about how renting a second home affects your own use of the property. You may not be able to use your vacation home during the most popular travel weekends if your goal is to maximize rental income. Know your priorities and whether you want to use your second home as an investment or just subsidize the mortgage payment. How frequently you rent your second home also affects your tax obligation.
Security for a second home
Whether you rent out your second home or leave it vacant, you need extra security to protect against vandalism and burglary. Vacation homes are susceptible to criminal activity; if burglars notice your home frequently sits empty, they’ll consider it an easy target for property crime.
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Home security deters crime and protects you if something does happen. A monitored security system is best because it notifies authorities automatically if a break-in is detected. Self-monitored systems require you to react and call for help instead.
Upfront costs and monitoring subscription fees vary widely for home security systems, so research home security systems and set a realistic budget based on your security needs. Keep in mind that a strong security system may get you a cheaper rate on homeowners insurance.
These are other security features to consider for your vacation home:
- Smart keypad locks: Smart keypad locks are especially convenient for short-term rentals because you can change the code between tenants. And vacation homeowners appreciate the ability to let maintenance workers and cleaning staff with the click of a button.
- Smart smoke detectors: Traditional smoke detectors aren’t helpful if no one’s home. But smart smoke detectors send push notifications to your phone, so you or your local property manager can call the fire department in the event of a fire.
- Smart leak detector: If your vacation home is in a flood-prone area or has aging plumbing, buying a leak detector is a small price to pay for peace of mind. These devices alert you when water is detected, so you can take action before serious damage occurs.
Maintaining a vacation home
What about when something goes wrong? It’s easy to keep up on maintenance when you live in a home and notice every strange noise, but problems in a second home easily go undetected. And the longer a problem sits, the bigger it can grow.
Proactive maintenance is necessary to prevent your vacation home from turning into a money pit. Start with listing your home’s major systems and when they’re due for service. Then, prepare for minor repairs by screening handymen now—before you need one. That way you know exactly who to call when something goes wrong and can trust that you’re getting a fair price. You can find handymen—as well as cleaning services and landscapers—at online sites, such as Home Advisor and Angie’s List.
If you can’t get your eyes on your vacation home on a regular basis, hire someone else to manage maintenance. Many property management agencies include inspections and maintenance coordination in their service plans. Before taking a hands-off approach to second home maintenance, double-check your contract. If you think maintenance is covered and it’s not, you could be in for an expensive surprise.
Owning a vacation home in retirement can be an amazing reward after decades of hard work. But if you do it wrong, it can also be a major burden. Before investing in a vacation home, make sure you understand what you’re signing up for, from the mortgage payments to the maintenance. As long as you’re prepared for the realities of owning a second residence, buying a vacation home could be the best choice you ever make.
This article originally appeared on Credit.com.