Whether it's the lakefront getaway, summer beach home, or mountain retreat, you'll want to take these things into consideration before making the offer.
1. Know the Area.
Don't even think about buying until you've visited the area and spent a good amount of time there. No amount of research online or talking to friends or family will prepare you for spending weeks, or years, living in a new area.
2. Match your lifestyle.
Many first-time home buyers today are opting for vacation homes before they purchase primary residences. What's most important about this strategy is matching your lifestyle to your house purchase. If you live in a city, but want lots of space, a home in the country might be just what you're looking for while you keep renting. Or, if playing golf every weekend is part of your routine, maybe it's time to find a home near the links.
3. Understanding Fixed and Variable Costs.
The purchase price is just the beginning of your budget. Your costs to use and maintain your home are also a significant expense to consider and may vary entirely from what you are used to. The expenses of a summer home versus a winter home can differ greatly when it comes to maintenance (snow removal, storm-proofing, flood insurance, fire, etc.), frequency of use (property management costs and security and alarm systems), and taxes.
A good rule of thumb is to set aside ~2% of the property's value for maintenance costs annually. Budgeting for taxes are a bit easier (though subject to change), but taxes can also weigh heavily and differ year to year, as well - and more than 2% at the State level alone!
4. Ease of Access.
How easy will it be to get to your getaway? A beachfront home in Costa Rica may sound like a dream, but how willing are you to take that trip if it requires two flights, a rental car, and a three hour drive? It's also possible that the 30 miles of dirt back-roads that require a 4 x 4 takes the same amount of time as the 3 lane highway (with or without traffic).
You can use a site like Travel Math or Google Maps to estimate the time and cost of getting between two places to help compare apples to apples.
5. Generating Income.
So, you want to AirBnB? Better check your ROI and the local regulations. You should have a strong understanding of the local rules (and costs) that may turn a great investment idea into a legal nightmare.
In addition to knowing the estimated income, you should factor in occupancy rates during high and low season, and marketing costs. Just because a home is listed for $1,000/night online, doesn't mean it's renting...
Local laws can also put a damper on your investment use. For example, under the NY State Multiple Dwelling Law, rentals of a duration of less than 30 days can cost you up to $7,500 per violation. Local town laws can be even more restrictive, like those in the Hamptons that require you to register all rentals, pay a registration fee, and ensure your dwelling is up to code - failure to comply can carry a hefty fine, or even jail time. Looking to purchase a co-op or condo? HOA or board rules may outright preclude you from renting altogether, unless certain requirements are met.
Lastly, it's worth noting that any rental income on properties rented for more than 15 days/year require you to file taxes when April 15th rolls around, so you'll want to keep records.
It's always important that you make these decisions alongside a professional who can help answer all of your questions. Whether it has to do with the local area or the financial implications, a great agent will help guide you.