Leisure Real Estate: 6 Things To Consider Before Investing In Vacation Homes

Is there a vacation spot that evokes fond memories in you? Would you like to buy a home there? 

Such decisions should never be entirely driven by emotions. Buying property is always an investment, whether you recognize this or not. So, do not ignore the financial aspects of the matter. Ponder over these factors deeply before you purchase property:

1. Costs: You perhaps assume that it is much better to buy a vacation home than to stay in hotels in your favorite vacation spot. If this is the assumption that guides you, compare the annual expenses on hotel rent with the cost of buying a vacation home.

You should not ignore the maintenance costs, and the costs toward insurance, utilities like electricity and water supply, and home loan interest rates. You will also have to pay property tax on your vacation home. Unfortunately, most home buyers fail to consider these costs. You might also want to hire a property manager, a security person and a maid.  

2. Time: You will have to spend time on furnishing and maintaining the property. Paying property tax and other taxes on it could be time consuming too. Though you probably would spend less time in your vacation home, its maintenance would require almost as much time and effort. You should not buy a vacation home if you are not prepared for this.

3. Location: Where would you like to buy a vacation home? Have you been there long enough? Some vacation destinations might be pleasant for a short while. But, visit the place when it is not the peak season for tourist travel, and objectively judge the amenities in the neighborhood. Does the place have good social infrastructure in place? In vacation destinations, the cost of living can be unusually high, when compared to places with the same level of infrastructure and amenities. Food and alcohol might be charged higher than it usually is, in restaurants and shops that cater to tourists. 

4. Access: Is it far from the city or town that you live in? An ideal vacation home should be an overnight drive away. Owning a home might necessitate more visits than you assume. So, you would get the most out of your vacation home, if you can reach there on long weekends and other holidays without spending much on flights or trains.

5. Security: If you do not live in your home, burglars might see it as a safe target. When burglary happens in remote areas, you might even not know it for a long time. A dependable security guard might be essential. In villas, many prefer to have an outhouse with a gardener, security guard and maid . Find out whether the area is safe to live in by researching the crime rate in the locality.  

6. Rental income: It is often not worth it to own a home and maintain it if you would not stay there for more than a month in a year. Many people, who own apartments in India rent it to tourists if it is in a vacation spot. Find out the rent your vacation home would command by consulting a real estate agent or a holiday home owner. If your rental income is enough to cover the cost of utilities, maintenance and taxes, go for it!

(Katya Naidu has been working as a business journalist for the last nine years, and has covered beats across banking, pharma, healthcare, telecom, technology, power, infrastructure, shipping and commodities)