Oct 8th, 2012 by Jennifer Lynn
I’d love a holiday home!
Have you ever dreamed about stealing away in the dreary weather to a destination with constant warmth and sunshine? What about lodging in a place of your very own during your family’s winter weekend ski retreats? Buying a holiday home is an alluring luxury that promises to give you the best of both worlds. But what exactly can you expect when you turn this fantasy into a reality? Read on to find out.
The Basics for Beginners
At first glance, buying a holiday home will not be all that different than buying your first home was. You’ll need to determine a realistic budget for what you can afford by weighing your monthly income and current expenses against the selling price of the house. Remember to factor in utilities and maintenance fees, and determine who will be responsible for performing upkeep on the property. Carry out a property inspection and determine whether or not additional renovations and repairs will need to be made to the house, and how much they will cost.
Finally, secure a mortgage with favourable terms and rates from mortgage brokers. If you’re only planning to own the home for a short time, a variable rate mortgage with an open term may be your best bet in the current housing climate. Conversely, now is also a good time to lock into low fixed interest rates if you’re planning to own the home long-term.
Important Considerations For Renting
Things get a little trickier if you’re planning to rent out your holiday home in the off-season. The obvious plus of renting is that you’ll get the opportunity to make some money from your investment. But before that can happen, there are several considerations you need to keep in mind.
The first—and perhaps one of the most important—is location. Do some serious research on the area and the number of tourists it receives annually. Is there a demand for new rental properties or is the local housing market flooded with properties? Consider ways that you can reach niche markets—ecotourists, golfers, foodies, couples, adventure tourists, etc.—and then consider each group’s unique needs. Remember that tourists love properties with modern facilities, good views and outside recreation areas, and easy in/out access in close proximity to local restaurants, sights, and attractions. Talk with local realtors and neighbours to determine if your property is likely to do well, and how much you can expect to charge for rent.
Another major consideration is insurance. “Named perils” policies are popular with insurance companies for holiday homes, but be warned that these may not cover the cost of water damages or vandalism. Carefully review the terms and conditions of your policy as you will be financially liable for any damages not covered by it. Once you’ve calculated all these costs, you’ll have a better idea of whether or not a holiday home is worth the investment.