Owning a vacation house is pretty much the dream, as more and more Americans are looking to invest in properties. According to 2019 housing statistics, 65.1 percent of the population owns at least one home already, and the appeal of getting a second place—to solely use for getting away and relaxing—is extremely understandable. (Especially in the time of a global pandemic, when getting away is what we're all dreaming about.)

As you might have guessed, however, buying a second home isn’t an option for everyone. According to Priya Malani, founder and CEO of financial firm Stash Wealth, “there are several aspects to take into account, from the price of the home, to how much you’ll use it, to whether you’re also planning on using it as a rental.” Below, she pinpoints her top tips to consider before taking the plunge and buying that stunning waterfront home you’ve always dreamed about.

Wait, Is Now the Right Time to Buy a House at All?

With businesses shuttering and layoffs becoming more and more commonplace in the wake of COVID-19, it might not be the time for you to invest. "Unless you’re sitting on pretty hefty savings and know your industry won’t be impacted by what’s going on, then you should err on the side of caution,” Amanda Abella, author of Make Money Your Honey: A Spirited Entrepreneur’s Guide to Having a Love Affair with Work & Money, told House Beautiful for our primer on whether it's a good idea to buy a house during this pandemic at all.

At the very least, you can start saving (skip down to number 4 below to learn more)—and scouting affordable markets—to plot your future purchase. It's never too soon to start! And if you are ready to take the leap, read on.

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1. Know Your “Why”

A vacation home is desirable for a lot of reasons, particularly if the location is very desirable. However, Malani recommends you actually consider why you’re buying the home before doing so: Is it somewhere you’ll actually plan to visit every year? Is it more of a status thing? Are you planning to retire in it or rent it out?

“Knowing the reasons behind the purchase will help you plan your budget and the things you’re not willing to compromise on, which is information you absolutely need before deciding on investing in a vacation home,” she says. We recommend writing down all your reasons first, and then really evaluating your needs based on that list, so that you can look for homes that’ll fit your area, location, and budget.

2. Ask Yourself: Would I Buy This Home as My First Home?

“Sometimes, we see our clients focus their financial efforts on saving for a vacation home before their primary residence,” says Malani. “This has become more common in areas where the cost of living and real estate prices are a lot higher than the national average, like New York or L.A.”

For example, if you’re on the younger side and know you’ll eventually be moving to the suburbs to start a family—but also know you really want a lake house—then making that investment first might be a smart move. Especially if it's in a more affordable area than your currently primary residence. But, as Malani advises, you need to figure out whether that is an investment you know you’ll be able to sit with for a while.

"If you can rent the place out, someone else is helping to pay the mortgage."

3. Research All the Details About the Area

“Is the location of your vacation home in a popular destination? If so, do you know if it’ll stay that way? How will prices be when you’re ready to buy?” asks Malani. These are all questions you need to (attempt to) answer sooner rather than later, keeping in mind the fact that prices may very well rise sooner than you think they will. So, it's a good idea to save 1 to 3 percent more than you think you’ll need for a down payment.

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4. Start Saving Immediately

“Before you can think about buying a vacation home, you’ll need to evaluate your current financial situation and whether or not you have money to put towards saving for it,” says Malani. “If you don’t have any extra money left over each month, saving up for a home will be pretty tricky! However, if you do have money left over or plan to make changes to your expenses to free up some cash, you’ll want to open up an online savings account and start stashing the money there."

Tip: "Nickname your savings account "Vacation Home" to keep your eye on the prize."

5. And Plan to Save More Than 20%

Historically, most second homes require larger down payments (around 30 percent) and higher interest rates than first homes, which is something you need to be aware of. “For example, if you’re looking to buy a $200,000 beach house, you’ll need to save up a minimum of 30 percent, or $60,000. If you’re saving $600 a month, it’ll take you a little over eight years to save up for the home,” explains Malani. “Keep in mind that home prices may go up in that time frame, and there will be closing costs and other expenses to consider. So, it’s best to target a few percentage points more than the down payment as your savings goal.”

6. Evaluate the Local Rental Market

“Most of us are willing to compromise here and there on what we’d consider for a second home, versus our primary residence," says Malani. "We also think about the benefit of rental income, which directly impacts the absolute cost. In other words, if you can rent the place out, someone else is helping to pay the mortgage.”

If you know it’s possible to rent out this home and want to consider it, then that may help you earn back some of the money you’ll spend buying it. However, don’t assume you’ll make a certain amount of money by renting it out, as rates can fluctuate.

7. Don’t Forget About Maintenance Fees

All homes require maintenance. And average annual maintenance fees—for any sort of home, first or second—are about 2 percent of the property's value each year. Buyers often underestimate the cost of maintaining a home, particularly when it comes to roof jobs, exterior paint, and other similar pesky long-term projects, but it’s important to consider that in your savings plan, too. “If you’re on the beach, for example, it’ll be costlier to maintain,” says Malani. (Salty air is corrosive!)

Tip: Plan for annual maintenance costs equal to 2% of the home's overall value.

8. Consider a Diversified Investment Portfolio

“If, based on your savings potential, a vacation home isn’t in your near future (the next two to three years), then you can use a diversified investment portfolio to help your money ‘work harder for you’ until you need it,” explains Malani. “The key to working towards your vacation home is automating your savings. Figure out how much you need to save, and set up an automatic transfer from your checking account so you don’t leave it up to chance.” Or, you know, impulse shopping.

"The key to working towards your vacation home is automating your savings."

9. Be Real About How Much Time You’ll Spend There

If you’re going to invest that much money in a home, it should be a place you’ll actually plan to visit… ideally multiple times a year. “How many times you plan to use it is certainly helpful, but it’s also a hard metric to pin down because, as we all know, life happens,” says Malani. “The breakeven will change based on things like market value and how much money you put into the home, as well as the furniture and decor you plan to buy.” It may take several years for you to break even on the home. But: As long as you enjoy spending time there, it may well be worth the investment.

10. Don't See It As a Retirement Plan

Think about whether you could retire in this house. If not, then you’re probably going to have to eventually sell this house to buy the home you’ll actually retire in. So definitely take the time to look at its resale value as well before making the leap. “It’s almost never advisable to look at a piece of property as a retirement plan,” says Malani. “For that reason, you’ll want to make sure you’re adequately meeting your retirement savings goal before planning to buy a vacation home… or even a primary residence, for that matter.”

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