Buying a family vacation home
Since I was a teenager growing up in the Lakes Region of New Hampshire I knew two things: 1) I would move away and 2) I would return. And I have returned, with my family year after year for more than 20 years. With our kids we have spent countless hours in the clear freshwater playing, boating, tubing and hanging out in the sun on Lake Winnisquam. At night we grill, sit around the firepit, laugh, and play Michigan Rummy and Canfield until the wee hours. Finally, after years of renting, we finally bought a camp on the water. It has been a lifelong dream come true but it was not easy.
With vacation home sales heating up towards the end of the summer season, I thought now would be a good time to share a few tips for buying a family vacation home.
Who is it for?
When buying a family vacation home, it is very important to determine who is it for. This may sound like a rhetorical question but actually it is not. Parents especially are in the business of creating great memories for their children and often buying a vacation retreat brings visions of a place to rest, relax, and be together. When your kids are young this seems simple. But as your kids become young adults with friends and other interests, there is no guarantee that they will come to your dream vacation home.
I have worked with several families that have bought or built vacation homes with the expectation that their kids would gather with them every year for special times only to discover that their kids have other plans or little interest. Sometimes this results in the vacation home getting sold. It can be a crushing realization if you have had your heart set on building a family destination for reunions and gatherings.
Where will it be?
As with all real estate, it is location, location, location. Where do you want to be? Where is your happy place? Can you afford it? Is it realistic for your resources? Sometimes the perfect location is out of reach financially, especially if you are paying for college, saving for retirement and trying to cover other important expenses. Also, will it be a short drive away or require plane tickets to get there? If it is far away, who will be taking care of the property when you are not there? For us, having the camp be a 2-hour drive away was important not only for accessibility but also in case we needed to check in on it after a storm or to perform routine maintenance.
Are you ready for more work?
A vacation home is another home in addition to your primary residence. That usually means two properties requiring lawn care, home maintenance, HVAC service, property taxes, and bills that need to be paid. In addition, if your home needs updating, are you going to hire someoneor are you going to make the updates yourself? Do you have the time and skills to make the updates? For us, buying a fixer-upper in our ideal location was key. We have hired out for some of the difficult or time-consuming jobs but taken on jobs we knew we could accomplish, such as painting and minor repairs.
Can it be changed, renovated, expanded?
Increasingly, lakefront, oceanfront or mountain properties are subject to additional restrictions on building or changing the property. In many locations near water, environmental laws restrict how close to the water one can build and what changes, if any, can be made at the water line. I have always thought a boat house on the water would be pretty cool but nowadays, no one can build a new boathouse on a lake in New Hampshire.
In addition, being near the water may automatically put your property in a federal flood zone. With storms increasing in severity the last few years, homeowner’s insurance has been skyrocketing. And, vacation properties tend to cost more because they are not occupied all the time, meaning that damage could go unchecked for a longer period.
Will you need to rent it out?
Many vacation homes are in high demand, desirable locations. Often we hear from people who are considering buying a second home, “We going to rent it out and that will take care of the expenses.” Unfortunately, most vacation homes are seasonal rental markets meaning that it can be hard to rent for the entire year. Yet, the expenses of operating a second home remain.
When you own a vacation home, you will have a lot of expenses, including ones you had not anticipated. When you add it all up, most vacation rentals do not turn a profit (unless you own the property outright). If you are considering renting out your new vacation home, remember that it is actually a business. And businesses must be run to make a profit, or at least break even. Because most vacation homes do not turn a profit, you should be prepared to contribute funds every year to enjoy your dream home.
When will you sell or transfer it?
The last thing anyone is ever thinking about when they buy their dream vacation home is when they will sell it. But this is a very important question. As we move through the different chapters of our lives our needs and circumstances invariably change. If you buy your vacation home today, will you still be up to performing all of the maintenance (Think: bringing in the dock or pulling your boat out of the water in the fall when the water temperature is 50 degrees!). I am pretty sure that I will not be doing that when I am 90 years old.
Recently we have encountered several families with second homes that have been in the family for generations. When the parents die, will the children be willing and able to take over the maintenance and expense of maintaining the property? These can be heart-wrenching decisions that are complicated by some adult children who want to keep the property and others who have no interest, moved away, or have no money to contribute to paying the bills. Sometimes the best decision is to sell and give everyone their respective shares.
What about taxes?
“You can write off all of your expenses for a vacation home, right?” While there are a lot of expenses that may be tax deductible, the expenses of operating a vacation rental are still substantial. It is not as though the tax deductions make owning the property a free investment (although some have tried). Deductions require careful recordkeeping of qualified expenses and remaining compliant with room, board and meals tax laws. With the explosion of Airbnb’s and other online rentals, states are paying close attention to anyone who is renting out their vacation homes.
Get help from someone who knows the area
Using a local real estate agent who is very familiar with vacation homes can save you a lot of time and money. They usually live in the area and understand the special circumstances that come with buying and owning a vacation home. They can also help you find a property that fits with your circumstances and budget.
Establishing a connection to a place you love
As a parent I’ve always been interested in creating great memories for my family, especially my kids. For some folks that means going different places every summer but for us it means going back to that same place where we have all those memories and stories to tell. In fact, we’ve kept track of every summer rental and labeled them with the most memorable aspect. Names such as The Duck House and The Bear House have special meaning and immediately bring up fond memories (The Bug House does not conjure up good memories). We’ve liked that legacy and hope to keep it going as long as we can and as long as it is meaningful.
If you are thinking about buying a vacation home, I am glad to share my experiences, including how I began our five-year search and how I analyzed the financial impact of buying the home.
If you would like to talk about buying a vacation home, give me a call. I’m here to help. You can schedule a quick call with me by clicking HERE.
Lyman H. Jackson
Lyman@PlanWithFPS.com
617-653-3303
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· The vacation recharge https://planwithfps.com/blog/the-vacation-recharge
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