If you've dreamed of owning a vacation home your whole life, you're certainly not alone. Vacation home purchases were up 16% in 2020, an increase that was driven by the pandemic and the flexibility of remote work. Whether you need a new place to rest and relax, or you're looking to supplement your income with a rental property, it's easy to see the appeal behind investing in a second home.

Especially here in Livingston County, with our close proximity to relaxing lake living.

Determining the best time to purchase a vacation home can be a daunting decision, to say the least. When making such a large investment, careful planning is key to minimizing risk. Our real estate agents recommend considering the following four tips when deciding if the time is right:

1. Define Your Goals
   While there are many reasons to purchase a vacation home, you should be sure to define your plans and goals before taking any action. A vacation home should not be an impulse purchase. Instead, decide where you'll purchase the property, how often you plan to use it, and if you're willing to rent it out while it's unoccupied. By defining your plans, you'll be able to develop a list of requirements and an accurate budget, which will make it easier to narrow down your choices and find the best place for you.
   
   
2. Research The Area
   While you might be familiar with the area, it's still important to do some research into the local real estate market. Check out recent real estate transactions for neighboring or similar properties. It can give you a good idea if home values in the area are on the rise or falling. Understanding local market trends can help you better predict your return on investment. Your real estate agent can help provide this information as well.
   
   
3. Evaluate Your Financial Situation
   If you're still saving for a future vacation home, keep in mind home prices may continue to rise over the next five years. When saving for a down payment, you should plan to save 2% to 4% more than you think you'll need today to be safe.
   
   Keep in mind, vacation homes expenses often involve much more than just the down payment, mortgage payment, and local taxes. You'll also need to factor in maintenance and upkeep, furnishings, appliances, and additional utility bills. If you're planning to rent the property, remember that you'll be responsible for making any repairs requested by the tenants or hiring a property management company. All of these things should be factored into your expense calculations when evaluating your financial situation.
   
   
4. Understand The Tax Implications
   Second homes often present unique tax implications. In most cases, your mortgage interest on your second home is tax-deductible. If you're renting out the property, you might be able to obtain additional tax breaks as well. If you rent out the property for more than 14 days a year, you'll have to report your earnings, but the good news is you also deduct utilities, repairs, and other fees. Make sure to consult with your real estate agent and accountant to understand the tax implications before making the purchase.

With proper planning and research, a vacation home can be one of the best investments you can make. To start searching for your new property, contact us today.