How to Buy the Best Holiday Home

You’re thinking about buying a recreational property. Maybe you spend hours stalking Pinterest for inspiration. Or maybe you want to diversify your real estate portfolio. Or maybe you’re just ready to find your own piece of land.

Whatever your reason, buying a second home is a big deal! It's a riskier investment than most people realize, and it's a lot of work. I'm not discouraging anyone - as long as it's the right decision for you. Let's discuss some of the most important factors to consider before you move forward.

Assess why you are buying a second home

The first thing you need to figure out is why you’re thinking about buying a second home. Let’s go over the most common reasons so you can better understand your own motivations.

Vacation property

You can buy a place on the beach, in the mountains, or near your family. I get it! But stop and consider the trade-off. If you want a vacation home two or three times a year, you can find a less stressful way to spend your money. Use Slowhop or Airbnb every now and then and that's it. Don't base your decision to buy a second home on pure emotion or a desire to keep up with the Joes.

Investment

There are two basic investment strategies for purchasing a recreational property: renovating and reselling or renting it out as a source of passive income.

Real estate rental

When it comes to renting out your second home, you need to approach this commitment with your eyes wide open. Here are a few things to keep in mind:

• Rental income is usually not guaranteed . Tenants come and go. Unless it's a resort or tourist area, you could go weeks or months without tenants.

• Tenants can cost you money. Even if you ask for references and check them, you can't guarantee that someone won't damage your property. The loss resulting from carelessness of tenants can far exceed the income from their accommodation.

• Leisure properties require attention. If you are looking to purchase a second home to rent out, it is wise to purchase one in your area so that you can keep an eye on it and make minor repairs as needed.

Renovation and resale

Buying a house and renovating it can be a good idea to generate money, as long as you are ready to work. Anyone who has ever done renovations knows the difficulties of verifying the work of renovation crews. You need to have patience, time to supervise and be ready to solve someone's problems.

Make sure you can afford to purchase a recreational property.

This is the most important question you will ask yourself throughout the process. Can you afford a second home? Let's look at the details.

Pay cash for your second home.

Yes - I'm serious. The house and all expenses related to it should be paid for in cash. You should never take out a loan for a second property, even if it's an investment. A loan is always a risk. If you take out a mortgage, you add an element of uncertainty to your future. No matter what happens to you - job loss, death in the family, serious illness - the bank expects a payment every month. That second home should be a blessing, not a burden!

Save an emergency fund.

In addition to paying cash for a house, set aside three to six months of expenses to cover all of your home’s costs. What will they be:

• Rental agent commissions (platforms such as Airbnb, Booking.com)
• Home insurance
• Property tax
• Repairs and maintenance

This emergency fund will help you cover the costs of any maintenance issues that may arise. It's not a matter of if , but when !

Take into account furniture and housing expenses.

The house won't help if it's empty! Unless you're just flipping and reselling, budget for furniture for your new place and buy everything for - you guessed it - cash!

Get ready for commitment

Real estate is a hands-on and time-consuming business. If you want to do it well, you have to be passionate about it. Here are some questions to ask yourself before you jump into the fray:

• Do I have clearly defined goals?
• Do I like/have a gift for renovations?
• Am I ready to take on the responsibility of a second property?
• Do I have enough time to dedicate to it?
• Is this an emotional or impulsive decision?
• Have I thought about this for a moment?
• Is my spouse/family on the same board with me?

Are you still here? Let's make a plan to make your dream of a second home that you're planning to buy come true!

How to Buy a Second Home

Here are three steps to purchasing a second home.

1. Set a budget.

We’ve already established that you should pay cash for a second home. Consider a specific amount so you know exactly when you’re ready to make a move. Enter an amount for each of these categories:

• The property itself
• Transaction costs (agent commissions, notary and legal fees, taxes)
• Furniture and appliances (if you need them)
• Your emergency fund, including enough to cover three to six months of:
• Rental agent commissions
• Insurance
• Furnishing materials
• Property taxes

Don't pull the trigger until you have saved the exact amount you'll need to purchase a second home.

2. Do your research.

This is a big decision, so take your time! Take the time to understand exactly what you’re looking for. Explore different areas. Drive and walk around the areas that interest you. Here are some pro tips to follow when hunting:

• Don't buy the best property in the neighborhood (or area) . Look for a home at the end of the best block instead of the best home in the average neighborhood and run-down area.

• Decide if you want to work with a management group. A property management group makes your life as a landlord more convenient, but using one will eat into some of your bottom line.

3. Work with a trusted real estate agent

Do not, I repeat, do not try to go it alone! A real estate agent has access to all sorts of information you don’t have, as well as insight and experience in the market. Working with a professional will save you a ton of time and a ton of headaches – and you’ll save money and end up getting a much better deal.

Is it time to buy?

When you consider your options and have a solid game plan, buying a second home can be an exciting experience—a dream come true! But don't let your dream become a nightmare. That home can quickly become a burden if you rush into buying before you're ready.

You can also take advantage of our offer of maintenance-free investment in recreational cottages for our Clients with the possibility of obtaining a fixed quarterly rent and the possibility of rotational owner stays in our centers.