Vacation Homes: The 3 Biggest Mistakes People Make When Choosing One (Yes, I Mean You)
Many people reach that point in their lives where they are reasonably stable in their personal and professional lives, have started a family, and want to enjoy their free time accordingly. You have a steady job and your spouse does too. Your kids are at an age where they can start to share some of their leisure activities and maybe even have fun on their own while Mom and Dad do something else. This is when you start thinking about a vacation home, perhaps in or near an area that offers many of the activities that you and your family enjoy. However, you start to have doubts. I can afford? Will it be safe if it is not busy for long periods? Will we all have enough fun in that area to want to keep coming back? All valid questions. If you consider the 3 most common mistakes people make when buying a vacation home, you can avoid most of them. Keep reading.
Error n. # 1: buy retail
If you’ve been following the news since 2008, you are aware of the foreclosure crisis and the sheer number of foreclosures, short sales, and abandoned properties this has created across the country. So why would you pay the market price for a property when with minimal effort you can get a similar home for a fraction of the price?
What to do instead: Use online resources to view foreclosures, real estate auctions, bank properties, and similar opportunities in the area you are considering. You will be amazed at how much information you can easily find online and at the prices you will see that properties sell when they are in trouble for whatever reason. This does not mean that the property is dilapidated (in poor condition), although you will want to verify it. It means that the owners, or former owners, were unable to keep up with the payments and are close to losing the property or, at this point, it has been repossessed (foreclosed) by the bank. Banks are not in the business of owning property, they are in the business of lending money and making a profit on the interest charged. When that doesn’t happen, they will accept offers that you might consider ridiculously low, as long as they take ownership of your books and get some or all of the money borrowed back. Keep in mind that a bank may have made tens of thousands of dollars on a loan, even if the loan amount is still close to what it was 10 years ago. They won’t really lose money if they accept a lowball offer, even if on paper it looks like they did. Talk to someone local who specializes in distressed properties. They can be invaluable partners when making purchases.
Error n. # 2: think that only you can use the property
So you followed the suggestions above and are now the proud owner of a vacation home. Your employer gives you 3 weeks of vacation per year, and every now and then there is a 3-day weekend or similar time off that you can go and enjoy your property. So you leave it empty the other 40 and a half weeks of the year, right? Incorrect!
What to do instead: If you enjoy vacations in that area, chances are many other people do too. In fact, depending on the area, at certain times of the year you will find that the hotels and local rentals are full. So why not take advantage of this? You can easily rent a property by the week for the equivalent of a month’s rent. What this means in practical terms for you, if you play your cards right, is that you will get a vacation home for yourself and someone else will make the payments. What am I not going to like there? As with the first mistake, it is vital that you have someone local who can manage the property for you and take care of any issues that arise. Find a good partner!
Error n. # 3: think you only want 1 vacation home
So you have a vacation home and you’re done, right? Mission accomplished? Why stop at one?
What to do instead: If you’ve been paying attention, you must have already realized that with what we’ve covered so far, you can easily and quickly do this over and over again. Find a distressed property in another area that you like, buy it, use it when you can, and rent the rest of the time. Make sure you choose an area where it is easy and profitable to rent out by the week to vacationers, and always partner with a local who can find the property for you and manage it for you afterward. You’ll find that at some point these homes will pay off in full, more quickly if you’ve purchased them as explained above, and the rent money will now go into your pocket instead of paying off a loan. Not only do you have vacation homes in many great areas, you get paid to own them too.
We hope we have given you food for thought. One of the areas that we can recommend to do this, if you are in the northeastern part of the United States or like to travel there, is the Poconos mountainous region in northeastern Pennsylvania. You’ll find year-round activities for just about everyone, skiing, hiking, swimming, fishing, hunting, general outdoor activities, NASCAR racing, and much more. And of course a large inventory of distressed properties with banks eager to find buyers in any condition.