How much should i spend on a vacation home?

Buyers often underestimate the cost of maintaining a home, especially when it comes to roof work, exterior paint, and other annoying long-term projects that we all like to avoid. Hehman says a good rule of thumb is to set aside about 2 percent of the home's value each year for maintenance.

How much should i spend on a vacation home?

Buyers often underestimate the cost of maintaining a home, especially when it comes to roof work, exterior paint, and other annoying long-term projects that we all like to avoid. Hehman says a good rule of thumb is to set aside about 2 percent of the home's value each year for maintenance. For professionally managed rental properties, he says, buyers should expect the management company to pocket between 20 and 50 percent of rental income. Kelly explains that for investors who currently lack the means to acquire an idyllic leisure retreat, the path to owning a vacation home may begin with a more affordable, utilitarian rental property close to home.

Depending on the lender, you may be able to credit up to 70% to 75% of projected fair rents in the market (in Canada and the U.S. Department of State, respectively) determined with an appraisal when purchasing a vacation home. A vacation home needs maintenance like any property, from lawn care, oven tuning and a new coat of paint to cleaning gutters or replacing putty. That's why it's crucial to calculate the numbers carefully and estimate the cost of owning a vacation home before investing in a property.

This vacation rental not only generates income, but it also provides free accommodation during your well-deserved vacation. Using the example above, let's say you want to buy a vacation home with an income suite. Owning a vacation home can be costly, but you can consider buying and managing it as a joint venture with family or friends, which can reduce your risk. Buying a vacation home comes with rewards and risks, including the possibility that if you plan to rent the home for income, you won't earn enough to offset your expenses.

While vacation homes can gain value over time, the NAR reports that short-term speculation in residential real estate is a risky business, and most buyers decide on a property they will enjoy for many years to come. Add to these figures the travel expenses to get there and you'll quickly understand why most families only use second homes and vacation homes for 6 to 8 weeks a year. There are several ways to assess whether you can afford a vacation home and, if so, how much you can buy. Keep in mind that you may need special insurance coverage, such as homeowners insurance, if you plan to rent your vacation home.

The Baby Boomer generation is known as the well-to-do generation, more able to afford second homes and vacation homes than the previous generation.

Shawna Fluellen
Shawna Fluellen

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