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You've planned that perfect vacation, you've chosen where to stay and you like it so much that you are staying for good! That's what tourists believe when they go house hunting for a vacation home. Most tourists first think of hotels, though vacation rental homes have gained in popularity as a place to stay. Whether you're looking for a beach side rental in San Francisco or a mountain home in Tahoe, looking around to find vacation home to buy can present many challenges.
Here is my all time favorite, top 10 Myths tourists should consider when going house hunting for a vacation home. I'll be interested to see where you fit currently in your planning.
Myth #1: You need to focus on areas you've vacationed before.
Fact: You can look in new geographic regions. You don't need to be confined to areas that you've visited previously. Here's a tip, locate an area that you've always dreamed of and rent a home for a season to make sure this is the area that you really like. Go online and search for rental homes for vacation and you'll find some fabulous help in locating a dream vacation area.
Myth#2: You need to be pre-approved for a mortgage before you can start looking.
Fact: Getting pre-approved will increase your chances and the amount of homes a realtor will be willing to show you. However, you can alternatively work directly with the seller, there are many sellers who list online or in the local papers. However, an important step, particularly if you already have a home loan and will add to your debt level, is to get started gathering the documentation you need for the loan. Look at what Fannie Mae has to say and the typical questions asked in a home loan application and the documents you'll need to begin gathering. This is important to start early in the process because if you owe on your primary residence, you may be limited by what a lender is willing to give you for a vacation home mortgage. Alternatively, you might be able to refinance your primary residence at a lower rate for cash to buy a second home.
Myth#3: Your vacation home should be smaller than your primary home.
Fact: Think about what sort of vacation home you want first. Sometimes there are more choices of a type of home offered with vacation properties and sometimes there are fewer choices. For example, you could choose a cabin, a house or a condo. Condos come with additional issues, such as home owners associations (HOA). Cabins may have high maintenance as mostly those types of properties have to contend with environmental issues. Thinking about whether to choose a house versus a condo? That depends on you and the level of maintenance, liability and property taxes you want to pay. Also consider utility costs and look for vacation homes that have "green" in mind.
Myth#4: You have to pay more for a vacation home that is near the water.
Fact: Only you can decide whether proximity to water is important. As a rule, the closer you are to desirable attractions of a given area, the more you're going to pay for that convenience. However, there are many times where you can buy into planned communities near a lake that offer the conveniences of water proximity without the cost. You might have to try to locate sellers directly in more motivated situations, but is doable.
Myth#5: You need to choose a reputable brokerage company with a big name to help you locate a vacation home.
Fact: While a large real estate brokerage company will have many different agents to choose some you can also interview several local real estate agents of smaller brokerages before selecting one. Ask how many vacation home listings they have, how many years they've worked in the business, and whether they have a particular specialty. Make sure you're comfortable trusting the person you choose with your search. You will likely spend a lot of time with them. Also, ask them "what's your favorite vacation spot and why?", if their answer is similar to yours, you might have a good match with empathy.
Myth #6: You need to drive around and view 50 homes before you make a decision.
Fact: You don't need to waste all the gas and kill the trees by driving around town, however, I do recommend you learn about the hot spots. Here's a tip, before you begin your search in the car, view various homes in different settings online. Ask the agent or the Chamber of Commerce in that region to send you relocation brochures. Then visit those websites and sign up to get realtor listings to see what homes are available. Don't forget to check with craigslist.org and backpage.com in the region you desire for sale by owner listings that might contain a great bargain! Then select the top 5 and get in the car. This will help you get a sense of how location, size of the homes and other factors affecting price differences.
Myth#7: You can't maintain a vacation home from a distance.
Fact: Consider ongoing maintenance. How will you keep the house up if you're not there all the time, particularly if it's subject to a wide variety of weather conditions? Factor in the cost of hiring a local individual or service to look after the property in your absence. There are many property managers that will charge you up to 10% to manage your property and they have local contacts to get a repair completed quickly and affordably.
Myth#8: Renting a home every summer is a waste of money.
Fact: You need to do a rent versus buy analysis. Bankrate has a good wizard which will walk you through how to do this analysis at BankRate.com. Oftentimes, you'll be surprised by how much more economical it is to rent, however, the rent adds up and you also need to factor in that you might not get the prime rental home when you want it. Private units can be less expensive than you'd think. Think about it this way - if you're a family of 5, you'll likely need a hotel suite or two rooms to fit everyone in. If you stay more than one evening you'll be facing a large hotel bill at the end of your trip because hotels often charge extra for more than one person per room. A vacation rental home, however, is the same price no matter how many are staying in the home.
Myth #9: Vacation homes offer more privacy.
Fact: It's sometimes possible to find rentals with amenities like private pools and hot tubs to make your vacation as relaxing as possible. Booking a villa rental means you'll be able to enjoy your vacation to the fullest, all without worrying about other vacationers.
House or villa rentals offer more privacy than a regular hotel. Because many of the houses are single, detached homes, you won't have to worry about the noise from rowdy vacationers, housekeeping and slamming hotel doors. But if you have a lot of gear to enjoy the water or cabin environment, and a big family with a lot of friends and family that like to visit. Nothing beats a home of your own.
Myth#10: It's a bad tax idea to rent your home.
Fact: If you're in the vacation home only a few months or weeks of the year, regardless, if you rent out for more than 14 days in a year, the IRS categorizes it as an income property rather than a residence. You'll be paying taxes on the net rental income after expenses, which could bump you into the next tax bracket. See the IRS website for information on how this is treated.
This isn't necessarily a bad thing; discuss it with your tax preparer. Because you can also deduct expenses of the property in addition to management of the property, if out of your own home, certain expenses of your primary residence can offset this income providing a long term tax benefit.
Using vacation rental homes instead of hotels can add to the fun of a great holiday. These villa rentals can offer you more privacy, are great for large groups and families with young families and can reduce the overall cost of your holiday. Just relax and enjoy the adventure of owning a home, or renting, whichever makes more sense.
Greg Watson is a professor of business with research interests in entrepreneurship and ethics. You can learn more about various affordable vacation strategies, attractions, and events including Californian Vacation Homes at http://www.CaliforniaBeautiful.com
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