Can I Buy A Vacation Home & Have It Pay For Itself?

Have you always dreamt of having a vacation home to escape to occasionally throughout the year, but never thought it was possible? Well, with some thoughtful planning and searching, you can find the just-right opportunity that could work for you and your family. To have the second home you've been dreaming of and have it pay for itself while building equity, I will outline in this short video how short-term renting a property can provide you with a chance to own a second home and all the things you need to consider to see if this is the right situation for you.

I had always dreamt of having a second home for my family to enjoy, but I never really knew how I could make it happen. Now, I have found an opportunity that's allowed me to have a vacation home that my family and I dreamt about while we're building equity and creating family memories. I'm going to outline how it can work and the top things that you need to think about if you're wondering if this situation could work for you.

The first thing that you're going to want to do is reach out to a lender to see if you qualify for a home loan for a second home. I highly suggest that you reach out to a local realtor to ask for recommendations on which lenders you should reach out to because, when it comes to second home loans, not all lenders are the same, and there are some that are definitely more competitive than others. First, you want to figure out what you can afford for a mortgage. That's going to be the first step to determining if this situation is an option for you.

If you find out that you qualify for a loan, but you don't have a down payment for that loan, you may want to consider utilizing the equity in your primary home towards a down payment on the property. Now, this is obviously money you're going to need to factor into the total cost of owning the vacation home.

Let's talk about the cost of owning the vacation home. Of course, you have your mortgage. If you have to take a home equity line, you have taxes. But what are some of the other costs you need to determine? You're going to have utilities, electricity, heating costs, cooling costs, landscaping, snow removal, internet—all of those things. But another cost that many people don't consider is homeowners insurance. Homeowners insurance can cost more when you're short-term renting a property. Also, if you have a wood stove, if the property is on the water, those are all things that will increase your homeowners insurance. I advise you to reach out to your insurance agent first to ask how those things impact your homeowners insurance on a property because it might be a little more costly than you think.

The next thing you want to consider is the location of where you're going to buy your vacation home. Determining the location will vary depending on so many factors. Be sure to check out my other video where I discuss the top five things to consider when choosing a location in Maine for your short-term rental property.

Now that you know what you can afford for a home, you want to do some market research. Check out other short-term rental properties in the area. Find out what they're able to charge for a nightly rate. Try to figure out what's the average nightly rate that's being charged in that area. Once you figure out what that cost is, you're going to take a look at what your loan is going to cost, what are your average expenses going to be, and are you able to charge what other people are charging for a nightly rate? Then, what you need to determine is how many nights or weeks will you have to rent your property out in order to cover the cost of the mortgage, the expenses, or however much of your cost you want to be able to cover. It's up to you. You can cover everything, or you can just cover some of it and you use the property some.

I hope this has been helpful information for you to think about and for you to consider if you're thinking that maybe it's time for you and your family to get a second home. As always, if you have any questions about real estate or Maine in general, I'm always happy to chat.