10 Things To know When Buying a Vacation Home
The first question to ask when buying a vacation property is how you plan to use it. Is it for big gatherings, quiet getaways, or income producer?
Buying a vacation property is one of the most rewarding things you can do for yourself or your family. Here are 10 things you need to know:
1. Why Do I Want It?
Buying a vacation home isn’t always about just about a place to retire or relax. It can also be an investment, which generates income when you don’t want to be there. So that’s your first question. Are you using this second home mainly for fun or do you want to rent it out and make some money?
If it is mainly for personal use, then the most important consideration might be the size of the home and number of bedrooms. Is it big enough for family gatherings? Or you might want it close to the beach so you can watch the sun go down. If you are an investor, these details may not be important to you. What you might be looking for is a smaller property because it is easier to manage and rent.
Figuring out where you are on the spectrum and what is most important to you. This will help you find the characteristics of the property that will benefit you the most.
2. Keep Your Emotions in Check
Just because you have the cash for a down payment doesn't mean you should buy the property.
Buying a vacation home can be risky because it appeals to your emotions. Before you begin your journey make sure that you do a thorough check of your finances. Is your primary home paid off? Can you carry the operating costs? Do you have enough cash on hand?
Finding a mortgage in Mexico may be different than what you are used to so be prepared to pay a higher percentage in cash if that’s what it takes.
Some people take out the equity on their primary home to make a down payment on the vacation home. All’s well and good if the housing market remains stable. But if the market falls, so does your equity. Make sure this works for the long haul just in case the market does change for you.
If you are planning on getting a loan, talk to some mortgage brokers in the area to see what loans are available and get pre-qualified before you shop.
3. Where Do I Buy?
Your dream vacation home might be your backyard or Mexico. We’d like to think that Mexico would be your choice. Puerto Vallarta's international airport offers non-stop flights from most major cities and for a foreign destination has a lot to offer Canadian and US citizens.
A strong dollar, means Canadians are looking south of the border and US are right behind them.
The important thing to think about is the time and the ease of getting there.
4. Consider Pooling Resources
One way to ease the burden or to get a nicer property is through joint ownership. You may want to share the ownership with friends or family. The key is to make sure everyone understands the rules of the road, including a fair way to divide prime time use, what happens when one party wants to sell, and who inherits the property should be arranged ahead of time.
5. Beware of Tax Implications
Buying a home outside of Canada or the US could have tax implications. Owning property in Mexico can have some positive tax implications including extremely low property taxes and the possibility of exempting capital gains when you sell.
6. Location is Key
Buy a condo a block away from the beach and your potential rental income could drop by half. Vacationers are willing to pay extra for that week or two they spend in paradise. Views and beachfront are traditionally two of the main features people look for. Consider the trade offs. You may go for a lesser property closer to the beach than a larger property further away.
7. Condo vs a House
Do you have a big family and like to be surrounded by friends? Or are your vacations a chance to get away from it all? Thinking about this will help you decide whether you need a small condo, or a detached home with lots of space. Are you considering retiring in your new vacation home at some point?
Make a list of your important features. Things that were important in your family home may not be as important in a vacation property. Do you really need a lot of closet space? Will a smaller kitchen do since you plan to be eating out often? Will you want a space for an in-home office?
On the other hand, maybe you always wanted a pool, or an outdoor shower. Talk to your broker about future re-salability. Do homes or condos hold value best and which are easiest to re-sell?
8. Check Out the Neighborhood
Once you’ve decided what to buy and where, stay for a few days and look around. Find a location that you can enjoy long term.
You may have vacationed in the area before but not really gotten to know anyone. Talk to neighbors and locals. What do they think of the area and what is it like in the off-season? Can you walk to cafes and shops? Is this a good fit for your family?
9. Look for Hidden Costs
Take a look at taxes, management, and condominium fees. Mexico has a lower cost of living than most nearby countries. You may be able to have a daily maid, help at home with cooking and gardening. Investigate these options and their costs.
Other things to consider:
10. Inexpensive Doesn’t Always Mean Bargain
Buying on impulse can be dangerous. Make sure your agent helps you understand the market and market values. Make your offer with an AMPI professional who can help protect you throughout the transaction with things like a physical inspection and proper documents from the Seller. Do your due diligence and this exciting time in your life can be both financially rewarding and give you the life experiences you have been hoping for.
Timothy Real Estate Group – An innovative company setting new standards in Real Estate sales and services has the most professional and experienced Realtors in the Puerto Vallarta area who understand the intricacies of Mexican Real Estate ownership, the local market, Puerto Vallarta property codes and regulations and financing. The Timothy Group uses that knowledge to provide a sound analysis on every aspect of property ownership. Timothy Real Estate Group is known for professionalism and experience and they bring this to every transaction they work on for the benefit of Real Estate investors and developers alike.
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