What to Consider When Buying Your First Vacation Home


Location, location, location. One cannot begin any real estate purchase without reciting these 3 words. Buy in a location you love and that other folks will want to visit; preferably no more than a 2 hour drive from your primary home. That way you are able to visit or maintain the home easily. Keep in mind your ultimate goal, is it investment income, a personal getaway or a future retirement location?

What can you afford?

The housing and lending environment has changed drastically since the real estate bubble burst almost a decade ago. But it should serve as an important lesson to only buy what you can afford.

Be conservative. Typically you should put down at least 20% and your total debt to income ratio for homes, cars, and other debt should be no more than 36%. Don’t overestimate how much income you will receive from rentals and make sure you can carry the vacation home with a higher vacancy rate.

Property insurance in the Outer Banks and other vacation destinations usually costs more than other residential areas. It is also more expensive than your primary home because of the time it may be vacant during the year. Wind and flood insurance is not covered in the standard form homeowner’s policy either. Be sure to include the total cost for insurance and taxes into the affordability equation.

Figure on extra costs

Just like your primary home, a vacation home involves extra costs. Some you can anticipate and some you cannot. Make sure your budget will handle these surprises. Do you have the finances to replace the HVAC if needed or to repair other major items? If you use a Property Management company to manage your rentals, you will pay up to 20% of your rental income for their services.

The maintenance costs for your vacation home may be larger than you anticipate. Appliances, furnishings, and finishes suffer more wear and tear in a rental home. The exterior may require more frequent painting due to the ocean location and blowing sand. If you are buying a condo or a home in a community with shared amenities, make sure to include the associated fees for the common areas.

What property type is best for you?

It may be tempting to buy land and build your dream home. However, keep in mind you will have to navigate the permitting, environmental, CAMA permits and lots of architecture and building issues from long distance. That will be a large time commitment even before you even break ground.

Long distance buyers looking for new homes can get all of the advantages of a new home with the assurance of professional construction in many new home communities being built. Look for a newer energy efficient home to reduce operating expenses and will not require replacement of major systems for many years.

Alternatively, an existing home in an established community may be what you have in mind. Remember though that homes begin to need major items (roof, septic, plumbing or electrical) replaced or repaired beginning around twenty years of age.

A Condo or Villa in a resort area will reduce the amount of maintenance you need to perform to the outside and common areas. Those costs are budgeted in the Association dues thus reducing any surprises. But ask yourself how stable and financially sound is the Association you are buying into? Are the monthly dues likely to increase with a higher assessment to replace older infrastructure or aging facilities?

Work with an agent who knows the area

Work with a local knowledgeable agent in the area you have selected for your vacation home. The agent can be an invaluable resource for information on future developments and infrastructure planned in the area. Also, find out about the school districts, crime statistics and just the local feel or vibe of different communities to match to your needs. While some of these answers may be available on the internet, it is best to have a local “go to” resource you trust.

Will the house make a good rental?

Carefully consider what you are seeking in a vacation home and if this is what people are seeking in a vacation rental in the area. If you are looking for a quiet get away with no traffic, internet, phone or TV’s, you will limit the rental activity of the home. Many people are looking for pools, hot tubs, home theaters game rooms and lots of other amenities in their vacation home.

Are you prepared to be the landlord for the vacation home? Will you market your rental through VRBO or AirBnB? Besides writing leases and collecting rents, how will you handle emergencies, routine maintenance, cleaning and other services? Will you rent your vacation home only to friends, seek a long term tenant or only rent seasonally by the week?

Check the basics

Just because the vacation home has a wonderful view and is beautifully decorated, don’t be distracted. Make sure to have inspections and do your due diligence on the mechanical systems, roof, septic, electric, plumbing, and any other major system or feature. Better to find any problems before closing on the sale.

Visit the area in all 4 seasons

Most vacation destinations are very different in the off season. For example, Corolla is very quiet in the winter time. It is a wonderful time to walk alone on the beach with beautiful wide open vistas of sand, sky, and ocean. At the same time, there are few year round residents and it can be lonely for a newcomer.

Not all restaurants stay open the whole year and the grocery store may not stock your favorite items in the off season. Make sure you love the home in all seasons. Be realistic as to the number of rentals you are likely to have in the off season too. You need to be able to handle all expenses including heating or winterizing when the house is vacant.

Hold for at least 5 years

The real estate market will always have its ups and downs. Appreciation over the long term is a good investment. However, a short term holding period will not always let you recoup your closing costs. Real estate is not a liquid investment, a shorter holding period can limit your options when it comes time to sell.

If you have questions about buying your first vacation home or would like our assistance, contact Eillu at sales@eillu.com.

cta-buyers guide-horizontal

Yes, You Can Expect More With The Eillu Real Estate Team!

Mailing Address
PO Box 3009, Kitty Hawk, NC 27949
Physical Address
3712 Suite B North Croatan Hwy
Kitty Hawk, NC 27949
Zillow Logo
Trulia Logo
Realtor Logo
Homes Logo
MLS Logo
OBX Realtor Logo
Equal Housing Logo