If you find yourself leaving the workplace behind in hopes of pursuing a lifestyle of leisure, all the more reason to do it right by creating a budget that works for you. After all, rewarding yourself for a lifetime of hard work is a worthwhile pursuit as long as you can afford it. Here are some things to keep in mind when planning for the financial side of purchasing a vacation home.

Before you plan on taking on a new mortgage, you’ll need to make sure you can afford the monthly payments in addition to what you are currently paying for your first home and your other living expenses. It’s worth noting that places within a retirement community or a condo may come with homeowners association dues that will need to be factored into your budget. While these can be costly, they are helpful in keeping up with yard maintenance and trash services and usually provide amenities such as a pool or clubhouse.

Additional utilities and home insurance are also responsibilities to keep in mind. Depending on the location, it can be more expensive to insure a vacation home, especially if it is a risk for flooding and near water. How far away this property is going to be from your existing one? You may even need to hire help to upkeep it while you’re not there or live far from the property.

Be sure that you want to commit to a specific location instead of traveling around for vacation. If you tend to rent out a place several times a year in the same area, buying a vacation home can save you money and potentially earn you income from renting it out. Just make sure you do your research of the surrounding area to truly know if it is a good investment and will realistically attract renters.

As far as purchasing it goes, you’ll need to decide its purpose ahead of time. By making it your primary residence, you don’t have to put much down and will receive the benefit of lower mortgage rates and tax benefits. Furthermore, a Ditech article points out, “Once you retire, the profit from your sold home can go toward the current mortgage balance of your vacation home.”

If it is an investment property, you will be able to rent it out and deduct expenses. Additionally, beware that some cities have limits for how long you can rent out a property. Zillow recommends that you consult with a local agent and lender who specializes in the area and help, “clarify local transaction fees, taxes and commissions, as well as advise on local zoning and property rental rules.”

Realistically, in order to get your money’s worth from rent and enjoy it yourself, the home you purchase might require some remodeling. The key areas in any house are usually the kitchen and bathroom. HomeAdvisor quotes the average price to remodel a kitchen at anywhere from $14,888 to $29,293. To help you stay in budget, compare prices for materials online and ask if floor models are available. You can hire a contractor for the big stuff, but do small renovations including painting yourself. Furnish it with finds from thrift shops and make sure all the appliances are in good working order.

Lastly, consider investing in a vacation home as a family in order to make it more affordable and available to everyone. After all, property tends to be a good investment, as it usually increases in value. Once your dollars are in check, kick back and use it as a place to keep memories and traditions alive with the ones you love.

 

AUTHOR: Jim McKinley, MoneyWithJim.org Contact : jim@moneywithjim.org