Important Considerations When Buying a Vacation Property
Home buyers often buy a second home with a view to enjoying its use during holidays and possibly renting the home out during other times of the year (usually peak season). Purchasing a home is nearly always a good investment, especially if you select a home in the right location. Whether you grew up in Edmonton and you would love to have a second home to visit on the holidays, or you have simply fallen in love with the area, these are just a few things to keep in mind before picking your dream holiday home:
- Amount you can achieve on vacation rentals: You need to be perfectly sure about the reason for your holiday home purchase. If you are interested in a second home you and your family can visit frequently, especially during peak holiday season, then you may not be able to cut a whole lot off the mortgage through rental. It can be difficult to find tenants who are willing to remain in the home only during low season, which means that unless you can easily meet the mortgage demands, you should perhaps reconsider the times of your visit and understand that temporary lets are usually only in demand during high season.
- Management fees: If you plan on renting your home to a third party, you can always carry out the management and emergency repairs yourself if you live close by but if you live far away, you will need to rely on a management company and account for their management fee.
- Location: Is the home you are eyeing close enough so you can actually visit it often enough, without breaking the bank or travelling excessively long distances? Does it have to be located near shops or do you prefer a bit of isolation? Your choice of location ultimately depends on how you plan to use the home. If you hope to use it as a deferred retirement residence, then it may not be wise to purchase too far from amenities, hospitals, shops, etc., unless you don’t mind a bit of driving.
You should also conduct research and speak to professionals about any planned developments in the area which could raise the value of your home or the rental you can achieve. These include new transport lines, new recreational facilities and natural areas, schools, etc.
- Insurance: The extent to which your home is occupied will affect the type of insurance you can carry out. If your home is a true holiday home, most companies will only cover the insurance if you also insure your primary home with them. You should conduct research on how much insurance will set you back, especially if you are in a high-risk area. It may also be more difficult to obtain coverage for specific damages (for instance, damages due to vandalism) if the home is unoccupied for long periods of time.
- Mortgage: The extent to which a bank will finance the purchase of your holiday home depends on whether or not you insure the mortgage. Banks will usually permit the financing of up to 75 per cent of the sale price of the home, and up to 95 per cent of the sale price of a home with an insured mortgage. You can also rely on the equity built up in your primary home (via home equity credit), borrowing up to 75 per cent of the home’s value minus the debt you still owe on your primary home.
- Safety: If nobody will be living in your holiday home when you are away, consider investing in a secure alarm system and rely on neighbours to check into your home once in a while to ensure all is in order. You might also want to install security doors and windows, and to avoid leaving valuable items and even expensive items of furniture in the home when it is unoccupied.
CalgaryHerald.com, Do Homework Before Buying Holiday Home, accessed August, 2016.
Edmonton.ca, Housing Statistics, accessed August, 2016.
Ereb.com, Price stability continues in Edmonton’s Residential Market, accessed August, 2016.
Q, Holiday Home Insurance, accessed August, 2016.
Exploreedmonton.com, Festivals and Events, accessed August, 2016.
About Sara MacLennan
Sara MacLennan is the Director of Marketing at Liv Real Estate and a licensed Real Estate Associate. The bulk of Sara’s experience and wealth of expertise lies in on-line technology and marketing both for agents and consumers. Sara is the former National Director for Interactive Marketing for Coldwell Banker Canada where she was responsible for an extensive training program traveling to offices across the country training agents and brokers on marketing and technology. Find Sara on Twitter @edmontonblogger.