Maybe you have a great home, a couple of cars in the driveway, a stable career, and some solid investments.
For you, now might be the perfect time to buy that little mountain cabin, lakeside hideaway, or seaside beach house you’ve always dreamed of. Consider these important factors before you make that down payment:
1. Your goals
Why do you want to buy a second home? Is it an investment property, a potential place to retire, or a vacation home? Many second homeowners use their house for all three, renting out their property part time, using it for their vacation needs, and retiring there later in life.
Think about what you want out of a second home. Which features, size, and locations are important to you? Work out a tentative budget, keeping in mind fees, taxes, insurance needs, renovations, and year-round utility costs.
Buying a second home is a long-term investment and, unlike a rental or hotel, you can’t pick up and try again as easily. That’s why it’s all about location, location, location! Location determines where you’ll spend your time, which amenities you’ll have access too, what the weather is like, which risks there are…it’s all about location.
- Consider how far your vacation house will be from your permanent residence. You’ll want to spend as much time there as you can, but if it’s a six-hour drive, or a plane ride away, you’re less likely to use the house every weekend. Look for a house that’s within a two-hour drive and you’ll be more likely to make regular use of it.
- Have a thorough understanding of the area. Spend a lot of time there, especially off-season, to get a full picture of the town. Really get to know the area, the people, and surrounding neighborhoods.
Even the nicest places in the world have their warts, and most likely, your vacation home will too. Maybe your favorite beach town has a history of hurricanes and flooding, or your mountain cabin has an issue with frozen pipes. No matter how beautiful an area may be, there are always risks.
Identify them beforehand, and insure your new home from them if need be.
Talk to the locals, contractors, insurance agents, and friends to discover the risks associated with the area around your vacation home such as:
- Crime rate
- History of the home
- Natural dangers and disasters (floods, earthquakes, wind, tornados, heat, cold, etc.)
You may spend time in your second home, but until you retire there, it won’t take the place of your primary residence. When you go home, who will look after the house? If there is a plumbing issue, a leak, or a break in, will you only find out when you return days, weeks, or months later?
To mitigate these risks, consider:
- A security system or security cameras. These days, you can sync motion sensor cameras right to your smart phone and monitor your second home from the palm of your hand.
- Making friends in the neighborhood! Ask a trusted friend to look in on the place while you’re away.
Renting your vacation home is a great way to subsidize the mortgage, but there are added factors and responsibilities to consider, like:
- Time and effort finding the right renters.
- Determining the time it’s available for you to use vs. the time it’s rented.
- Costs, taxes, fees, and insurance associated with being a landlord.
- The possible need for a management company, to help manage the property on site.
Consider how the value of your second home will increase or appreciate over time. Again, it’s truly a matter of location. Look for areas where property values have steadily increased over the years. Investigate who is moving to these areas, new and planned construction, and trends in average home sales.
6. Additional home coverage
To cover your vacation home and the associated liability risks, it’s important to insure your new house with Seasonal and Vacation Home Insurance. This coverage is different from standard Homeowners Insurance, because it’s designed specifically for the demands and unique value of a vacation home.
Vacation Home Insurance typically provides:
- Comprehensive property coverage – covers a variety of physical losses.
- Named peril coverage – covers perils like fires, wind, hail, and lightning.
- Liability coverage –covers damages and legal fees if you’re found legally responsible for injuries or damages to someone.
- Actual cash value – covers the cost to replace or repair your property, based on its current value, age, and condition.
- Agreed loss settlement – covers the value of your home, minus any deductible.
Talk to us today (858-487-9200) about insuring your vacation home, and the discounts and options available to you.