One of the biggest things you can flex about is having your own vacation home—or homes. It leaves a huge impression on people mostly because it’s indicative of your financial status. After all, maintaining one home is costly enough as it is.
So if you’re ready to be a vacation homeowner, congratulations!
There are plenty of benefits and advantages you can enjoy with your own vacation home, for sure. But at the same time, you should be cautious about making this investment.
Here are some busted myths you should know about buying a vacation home.
You Don’t Need to Make a Down Payment to Buy a Vacation Home
This is one of the most common misconceptions about getting a vacation home. The myth is that your second home is going to cost a lot less than your first one. Sometimes it’s even suggested that you don’t even need to make a down payment.
If you think this sounds too good to be true, that’s because it is.
Buying a second home does not give you a free pass for making down payments. In fact, it’s the other way around. You’ll need to put up a bigger amount when buying your second home.
That’s because getting a second home means getting a second mortgage. That’s double the financial responsibility to be shouldered by the property owner. As such, lenders tend to have a higher credit score requirement.
Expect to put up as much as 10% for the down payment on your second home. The more you manage your expectations about those so-called “free” down payment schemes, the better you can prepare for your second home purchase.
You Won’t Need a Home Insurance
Just because it will not be your primary residence doesn’t mean you won’t need insurance for your vacation home. As a matter of fact, that only makes you need it all the more.
Since you’re not going to be there all the time, your property is left alone and unattended. Unless you hire a property manager or a stay-in caretaker, an empty property becomes more vulnerable to trespassers and other criminals.
At the same time, property damage like water leaks, bursts or broken pipes, mold growth, and even fire can also go undetected. Without proper home insurance, you may succumb to major costs in case of property damage.
Another reason you should get a home insurance policy for your vacation home is if you’re putting it up for rent. You won’t be around to make sure the guests are treating the property right, so you should at least get coverage in case any damages occur during the rental period.
Vacation Home Rentals Don’t Pay Off
One of the reasons interested home buyers get dissuaded from getting a vacation home is that renters don’t pay off as well as you might expect. They’re often advised that maintaining a second home on top of your primary home is expensive. And that, vacation rentals only get booked for the holiday season.
However, the appeal of a vacation home for renters isn’t limited to just a particular season. Instead of blaming the lack of return from vacation home rentals, vacation homeowners should focus on improving their marketing strategy.
Because no matter how beautiful the location is, no matter how luxurious the property may be, if people don’t know about it, how would they be interested in renting it?
The only way to truly make the most out of your vacation home and let the rentals give you great returns is by actively marketing your property.
Ultimately, having a second home or vacation home is very good for your investment portfolio. With the right strategy, however, you can make it work for you as a lucrative source of added income as well.