September 1st, 2021 at 11:00 am

header image for a guide to buying a vacation home featuring southern california homes on the coast

Vacations are all about rest, relaxation, and getting away from your typical routine and surroundings. With staycations on the rise, more people are looking to buy second homes or vacation homes where they can get away while having a place to call their own for the season.

Along with being a great way to stay extra comfortable on your vacations, vacation homes can also make great investments and potentially bring you some extra income. Of course, purchasing any property can come with its complexities, even more so with a second home. Learn more about buying a vacation home with our guide below.

The right time to buy

While some seasons might be better for buying a property than others, there generally isn’t a wrong time to buy. That largely depends on your finances and goals. Start by considering the “why” of owning a vacation home. Is it an investment, a place to get away, or a mix of both? Is it potentially a future retirement home? Answering these questions can give you a better idea of what actually to look for in a property.

From there, consider the housing market, both on a national level and at the local level. Finding the right deals can be difficult, but it’s a lot easier in a buyer’s market. Just don’t plan to flip or sell the property in the next couple of years.

Affording your vacation home

It’s not exactly surprising, but vacation homes tend to cost a lot of money. They come with the same costs of your first home (sometimes more) but without any of the cost-cutting savings and tax write-offs. That includes homeowners association fees, utilities, and property taxes.

Before you even start looking at listings: 

This process gives you a rough estimate of what to expect from your monthly mortgage payment, and from there, you can figure out whether it’s more economically viable to pay cash or to go for a mortgage.

Renting out your vacation home

It’s not uncommon for people to rent out their vacation homes in the off-season. This practice may help recoup some of the costs for maintenance and go toward mortgage payments, but you should also expect to do some additional research before you decide to rent out the property. Some neighborhoods actually ban weekly vacation rentals, only allowing monthly rentals.

Furthermore, you still have to report the income you make on a vacation rental, unless you rent it out for fewer than 15 days. The IRS also considers a second home an “investment property” if you spend less than two weeks in it and rent it out for the rest of the time. As of the IRS’ latest guidelines, you can deduct up to $25,000 a year if you actively participate in the property management and make less than $100,000 in your adjusted gross income. The former is probably the biggest challenge. “Active participation” can be hard to gauge, and the IRS probably won’t believe that you hold a full-time job and act as a property manager at the same time. Keep detailed records of how, when, and where you maintain your role as a property manager.

It’s also worth keeping in mind that the demand for renting your vacation home will likely be at its highest at peak times of the year. Peak times usually also coincide with periods when you want to use that property yourself.

Work with an agent

Whether it’s your first, second, or tenth home, you should always work with a real estate agent. Even if you think you have experience, a real estate agent just has the market knowledge to make the whole process that much easier. They also likely have more in-depth information and familiarity with the local market and, even beyond the sale, a real estate agent can stay in contact with you and let you know what’s available or otherwise provide assistance. This is highly valuable, especially if you don’t live in the area all year round.

This is why it’s a good idea to work with Berkshire Hathaway HomeServices California Properties if you are looking for a vacation home. With years of experience, exceptional education and training, and insider knowledge, our agents can guide you through the entire process of finding a vacation home, giving you the information that you need to thrive.

Choose the right location

Location is everything with a property, and a vacation house is no different. When you’re deciding on the best place to buy a vacation home for you, start by looking where you want to spend your vacations, but, ideally, you also want to find a location with appreciating real estate prices. This is also where a local real estate agent can come in handy. They should have an idea of the local real estate climate, and they can give you a good idea of where the market is trending.

The good news is that the asking price in vacation areas tends to be fairly flexible. This flexibility just comes from the low demand compared to urban or even suburban areas. You probably won’t see much competition as a vacation home buyer, though, of course, make sure you talk to a real estate professional. 

Before you dive in on any property, it may be a good idea to try things out beforehand. Stay in a vacation rental at least once, especially if it’s an area you’re not familiar with. Think about any surrounding amenities, as well as the accessibility of the property. Considering gas prices, airfare, and other travel costs, it’s worth finding a property that is easy to get to with plenty of accessible means of getting around.

It may also be worth visiting the location in the off-season to get a better picture of how the area feels year-round. Make sure that the area has enough of the things you need, like restaurants, grocery stores, and general amenities, along with things that will keep you entertained. Scope out the public school system. Even if you don’t plan to enroll your kids in school there, homes near schools that are well-regarded tend to have more value.

Above all, talk to some locals. No one knows an area better than the people actually living there. Talk to residents about the area, what they specifically like there, the changes they’ve noticed in recent years, and anything else that might be of interest. It doesn’t hurt to make friends, especially if you plan to have a second home there.

Financing and negotiations

There isn’t much disparity between buying a home and buying a vacation home. If you go the mortgage route, expect to pay at least 20 percent down if you want to avoid mortgage insurance. Depending on the area, the seller, and other factors, you may be able to pay as low as 5 to 10 percent down, though, again, work through your real estate agent to determine your best option. Keep in mind that investment properties tend to have stricter guidelines and thus higher interest rates

Make sure that you go with a local lender in the area of your vacation property. The lender’s knowledge and expertise of the local market can prevent future problems.

Negotiations on a vacation home can be a lot more flexible than with primary residencies. While people sell their second homes for a variety of reasons, many simply have a change of lifestyle, and they want to get through the sale as quickly as possible. Second-home sellers can provide some give in the price and the general terms of the sale. Some sellers may even be willing to carry a second mortgage for a few years just to get the deal done faster.

Be wary of alternative ownership options

There is a wide range of alternative ownership options, most prominently timeshares, vacation clubs, and fractional ownership deals. These options can seem tempting because they tend to come with lower entry costs, but they can be risky or a headache later on. Resale on any cooperative ownership property can fall apart over time, and trying to sell these types of properties can be a real hassle.

Ready to buy a vacation home?

Having a home that acts as a comfortable getaway can come with some definite pluses. Still, it’s important to understand all of the logistics and finances that go into actually buying a vacation home. Rushing into a purchase or not doing your research can quickly lead to you blowing through your budget and getting a bit overwhelmed.

Working with a real estate agent at Berkshire Hathaway HomeServices California Properties can help you avoid any common mistakes with purchasing a vacation property, ensuring that you get the right deal and come out on top.

Sources: HGTV, Investopedia,

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