There are risks and rewards involved in the prospect of owning a vacation home. One of the rewards would be the option of offsetting your expenses by renting your vacation home out for income when you’re not there.
Before investing in a property, the cost of owning a vacation home must be estimated and your numbers crunched carefully. Without proper preparation, rather than being a dream come true, the attempted purchase of a vacation home could be a nightmare.
Owning a vacation home comes with certain costs. It’s likely a second home. Unexpected expenses (a major system or appliance breaks down, for example), as well as recurring costs, must be figured into your budget. It might even cost you more than you thought if you have an interrupted rental income stream.
If you own a vacation home in Bergen County, what might the costs be? Here are some of them…
Furnishings and Decor
While you’re concentrating on all of the below-listed costs, don’t forget that your property will need to be furnished. Dining room, bedrooms, outdoor furniture, and other decor and furniture can run thousands of dollars. If you are going to be renting furniture, the cost could be more. For the record, there are some vacation homes for sale that come furnished.
Security
Whether your vacation home will be vacant when you’re not there or rented out, a home alarm system is never a bad idea. This includes outdoor cameras, a video doorbell, and similar equipment. Make sure as well that, if a breach occurs, the local police will be alerted.
Property Management
If you’re going to be renting your property when you’re not there, though you may think you can handle all of the rental, upkeep, marketing, etc. yourself, you may decide to hire a property manager instead.
Upkeep and Repairs
From caulk replacement and gutter cleaning to a fresh coat of paint, a furnace tune-up, to lawn care – and everything in between – just like any property, upkeep will be needed on your vacation home. Every year, about 1% of your property’s total purchase price should be set aside, generally speaking, for upkeep.
Property Taxes
You will pay vacation home property taxes just as you do with your primary residence. By region, county, and state, these can vary widely. Other taxes may include lodging, sales, and income tax.
Home Insurance
Compared to your primary home, the cost to insure your second home can be significantly more. Insurance costs will be affected by amenities, type of property, location, and more. Tip: It’s frequently more expensive to insure something that’s extremely desirable.
The Mortgage
Excluding property taxes and homeowner’s insurance, your monthly mortgage payment is likely to be your biggest expense. Compared to the rate of interest you’d qualify for on your primary residence, you can expect a 0.5% to 0.75% higher interest rate (approximately) on the second home mortgage.
You Know the Cost Now, Let’s Look at Some Homes – Call NJLux Real Estate
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