Whether your ideal vacation home is somewhere on the beach, up in the mountains, or next to your favorite lake, just about everyone has a spot where they would love to own a second home for family getaways.
If you were careful in your planning and are fortunate enough to own a second home near your favorite vacation destination, you are probably very happy with that home. But what do you do when it is time to upgrade to a better vacation home?
You might be dealing with a growing family, or perhaps you have reached a point financially where you can afford to invest in an even nicer vacation home. That’s great news, but upgrading to a better vacation home is filled with challenges, especially for out-of-town owners.
What Do You Do With Your Existing Vacation Home?
Before you even get started looking for your next vacation home, your are first going to want to figure out exactly what your options are for your current one.
One of the biggest negatives about selling a vacation home, assuming that its value has appreciated since you bought it, is that you are going to be exposing yourself to capital gains taxes that would not apply if you were selling your primary residence. This can take a big chunk out of any profits you make on the sale, and can be a damaging tax burden down the road if you do not plan accordingly.
If you need to pull out your capital in order to make a down payment on your next vacation home, you pretty much have no choice but to sell your current vacation home. However, if you do not require the capital, it may be a better option for you to simply rent out the current vacation home and buy the new one separately.
These are the type of conversations that you are going to want to have with your accountant, and it certainly doesn’t hurt to listen to the advice of a real estate agent who knows and understands the area well.
Finding a New Vacation Home
Once you decide on a plan for how to handle your existing vacation home, the next step brings you right back to the same place you were in when you started looking for a vacation home the first time. The only difference now is that you have a lot more knowledge and experience.
In order to best tap into what you have learned from your current vacation home, here are some questions you should be asking yourself:
- Will you be renting this new vacation home out when you’re not using it, or keeping it completely private?
- How often will you be using it?
- Do you want it to be in the same area as your previous vacation home or somewhere else?
- What are some things that were missing in your previous vacation home that you want to have included in your new vacation home?
- Were there any features in your previous vacation home that you have since realized were not necessary?
As you can see, your experience with your existing vacation home can be a huge asset in helping to understand what factors are going to be most important in your new vacation home.
In addition to having a better understanding of what type of vacation home will work best for your family, you are also going to have a better grasp on what you are going to be able to afford. The next step is to put together a budget and find a great local agent that you can work with.
Owning a vacation home is a dream for just about everyone who has ever gone on vacation. Having the ability to upgrade to a better vacation home is a fantastic opportunity, but you have to have a plan for both your current vacation home and the new one you hope to find.
Your local Carrington Real Estate Services agent can help. Contact one today!