Going over your budgetThis applies to any home purchase, but it’s easy to get swept up in a vacation home fantasy. If you had a great experience at a vacation rental in a particular area, your fond memories might convince you to spend “just a little bit more” in order to buy in that neighborhood. Or if you happen to catch a spectacular sunset when touring a property, it may seem meant to be, despite the out-of-budget price tag. In addition to your mortgage, you also need to consider ongoing costs — you still have to pay utilities year-round even if you only use the home occasionally — and budget for unforeseen expenses. Since buying a vacation home probably isn’t urgent, take your time to find something you love that’s also within your budget.The Pacaso fix: When you buy a second home with Pacaso, you can have it all — a stunning home in a desirable location for ⅛ the cost. Monthly operating expenses are shared, pro rata, among all owners, so you’re not responsible for a whole home’s ongoing costs. Your second home budget goes further, and you don’t have to sacrifice your picture-perfect vacation home dreams.
Counting on rental income to pay the billsWhen buying a vacation home, many people plan to rent out the property when they aren’t using it to offset the costs of ownership. Multiply the going nightly rate by the potential number of available days, and you might think you’ll not only cover your mortgage, but turn a tidy profit. Well, you might. But there are several factors to consider.
- Are you willing to self-manage the rental (fix the things that break, market the home, manage the calendar, deal with unhappy renters … the list goes on)?
- No? Then be prepared to pay a local property management company anywhere from 10-50% of your revenue to take care of that for you.
- Have you budgeted for the wear and tear of a vacation rental, which means more frequently replacing furnishings, fixtures and appliances?