3 critical points to consider when purchasing a second home
Shortly after Pat and I married, we purchased our first home. Once we settled in, we began to travel and developed our dream of owning a vacation home. We knew we wanted a waterfront home and since we live nowhere close to an ocean, we focused our search on lakefront property and implemented a serious savings plan . In the process, we enjoyed many mini-vacations and viewed countless cabins in Michigan, Indiana, and Wisconsin. With each viewing we learned more about what we liked and wanted. We made several offers. Some were not accepted based on price; one could not be formalized due to zoning restrictions that prevented the lot from being subdivided; and another we had to walk away from due to severe mold issues uncovered during the inspection and sellers who were not willing to negotiate.
In the process of our search, we developed a very specific wishlist. The overall goal was a cabin that we could enjoy now, when we started a family, and in the future when we retired. Our desire was a lakefront cabin with a price tag that would not require us to rent it out to help cover expenses. Another requirement was a home located on a lake large enough for a boat to enjoy cocktail cruises and tubing or water-skiing. A home that required serious elbow grease, renovation, and imagination was no problem. The cabin had to be large enough to enjoy time with family and friends, but small enough to minimize cleaning time. It is vacation after all!
When we moved to Southern California, we had to take a break from our vacation home dreams. However, we couldn’t escape our longing for open space, forest, and a lakefront paradise. When the opportunity to move back to the mid-west arose, we jumped on it and rekindled our search effort to finally make our cabin dream a reality. Because of our efforts in identifying the type of vacation home situation that would work for us, we have had absolutely no regrets and love every minute we spend in our peaceful oasis. If you are considering the purchase of a second home, here are some critical points you must consider before taking the plunge . We have watched others rush at the opportunity to purchase vacation homes, only to create unnecessary stress and financial uncertainty into their lives. I hope this information helps you fulfill your vacation dreams. Owning a second home is not for everyone. It can limit the opportunity to visit new destinations.
Why are you purchasing a vacation home?
A brutally honest answer to this question is critical to your happiness. There will be unexpected expenses and surprises along the way, so you must be 100% committed to your decision. In most cases, it’s not easy to quickly turn-around vacation properties if you have a change of heart.
Are you buying the home to enjoy personally? If so, what is important to you? Do you want a large lot to feel isolated from the busy world, do you want a big fireplace to relax with a good book or a challenging game, do you want a gourmet kitchen for fabulous vacation dinners after a busy day hiking or fishing? Will you need to rent the home in order to cover expenses? If you are buying the property as an investment, you need to understand what renters want in a property, the rental market, and competition. You also need to consider who will manage and maintain the property. This is especially important if you are not nearby and can add significantly to your monthly expenses.
Location! Location! Location!
What types of activities are you hoping to enjoy during your visits to your vacation home? Whether mountains, ocean, forests, or lakes, spend time in the area to get to know local amenities and culture before making a significant commitment. Are restaurants and grocery stores readily available? Is adequate medical care available? Is the drive or travel from your primary residence manageable? It might be fun to have a 5-hour drive initially, but this may prevent weekend use and can become tiresome over the years.
If you plan to rent the property, location becomes even more important. What is paradise to you, may not be paradise to others. Is there a reasonable pool of renters and what brings renters to the area?
Remember! You can upgrade or even rebuild the home, but you can’t change the location.
The Budget-Patience-Creativity Equation
We were lucky enough to find a foreclosed property. These properties may end up with several offers, as was the case with ours. In the end, we offered list price (appraised value) and waived all inspection contingencies. Yep! Lost some sleep on this! In the end, our bid was the one accepted out of ten on the table. Here’s the important lesson……we put down the minimum earnest money upon acceptance and proceeded with a home inspection anyway. There weren’t any glaring issues during the viewings, so we figured that worst case, we would lose a couple of thousand of dollars if we backed out of the offer. Seriously worth it after our lengthy search……this was the perfect cabin for us. The inspection gave us comfort that there were small, manageable projects we needed to take care of right away and the inspection gave us a list of projects to consider in the longer term. While this strategy worked for us, I highly recommend you work with an experienced real estate attorney prior to submitting an offer or certainly before signing a purchase contract. If you are flexible, you will have more choices. Keep in mind, this is a rental or secondary home, so the baths and kitchen don’t have to be perfect on move in day. Be patient, speaking from experience, it is nearly impossible to find the perfect property.
It is hard to believe, but this fall we will celebrate our 7-year anniversary of owning our piece of paradise. The first project was to stabilize the old boat house. Then we moved onto replacing a couple of picture windows and remodeled the nasty bathroom with the moldy window in the shower. In the short-term, we hid the horrid window behind a really cute shower curtain. Next, we added an entry way with storage, installed new entry doors, and replaced the linoleum kitchen floor with slate. We still have a list of projects, including settling on a fun name for our cabin and installing a sign at the end of the drive. ‘Flying Squirrel Tree House at Pine Knot’ is under consideration . We want make sure we tackle the list slowly to minimize the impact on our budget and stress level…..this is a vacation home.
I hope you found these tips helpful. Please comment if you are considering the purchase of a second home. What keeps you up at night? If you have a second home, do you have any tips to share? Again, it is your responsibility to work with an experienced real estate attorney to review offers and purchase contracts to protect yourself from unexpected expenses and obligations.
take care, Laura