Few if any life events signify financial freedom like buying a vacation home. But much like buying a first home, buying a second one comes with a similar set of responsibilities and risks. In some cases, managing a second home can end up being a pain because it is located hundreds if not thousands of miles away.
How To Buy A Home
Buying a vacation home involves the same process as your primary home: find a reputable broker, pick a home, negotiate the price, let the lawyers and brokers handle the rest, and then pay the bill.
Purchasing a vacation home, say in Mexico, Spain, Morocco, Australia or any other country, is finalized in the local currency. Sure, a real estate would be happy to accept foreign payment on behalf of their client at a hefty premium but there are many ways to avoid getting ripped off.
The easiest way to pay for a vacation home is through an online money transfer service that specifically caters to home buyers. Moneycorp has been helping customers buy and sell vacation homes for more than four decades through a dedicated account manager and highly competitive rates.
One of the many online Moneycorp money transfer reviews states the online exchange company oversaw 2.9 million customer transactions last year alone. Moneycorp also oversees £35 billion in transactions each year.
The process is straightforward and allows anyone to transfer funds of all sizes from currency to another at rates that are very close to the real market rate. Saving even 1% on a $1 million transaction is worth the extra time involved for the majority of people. In some cases, online money transfers can save 5% or more.
Advantage: Generate Income
You can rent out your vacation home so it generates extra income on the side. There are multiple platforms that facilitate a transaction between vacation homeowners and travelers who are tired of staying in hotels. The most popular platform is Airbnb which has listings in more than 80,000 cities around the world and can support 1.9 million bookings at a time.
The rise in popularity of alternative traveling also created a secondary industry geared towards homeowners that help manage some of the boring or tedious aspects of renting a home. The most important of which is a cleaning service that will send cleaners after each rental ends and ensure a vacation home remains tidy for future guests.
Other services will handle regular maintenance and take care of emergency repairs. Other companies specialize in the legal aspect of owning a home in a foreign country and provide accounting or tax advice.
When you aren’t living in your vacation home, why not put it to work and collect money?
Disadvantage: Governments Don’t Like It
Owning a vacation home in a foreign land implies a new set of risks, including potential changes in laws. One of the fastest-growing changes consists of new regulations on homeowners who rent out their properties. These law changes are popping up throughout the world and intends to keep real estate prices low and clamp down on what some call “rogue hotels.”
Advantage: Could Be A Solid Investment
Owning a vacation home could be seen as a form of investment. Real estate is considered to be among the most stable asset classes, especially in areas where supply is limited and demand is growing.
A beautiful villa off the coast in Italy or a Malibu beach house is sure to appreciate in value over time. It may also offer a superior return on investment compared to blue chip stocks.
Disadvantage: Could Also Be Poor Investment
Real estate investing will never guarantee an owner a return, especially one in a foreign country. One should be mindful of foreign exchange fluctuations and the impact it has on a vacation home. Even if a home value rises 20% over time, a 30% decline in the national currency implies a vacation homeowner has now lost 10% of their property’s value.
Advantage: It’s Freakin Awesome
The biggest advantage of owning a second holiday home is the fact that it is yours to do as you wish. Unlike a hotel, you are free to customize every aspect of your property from the types of floor to what direction the kitchen faces and how many baths.
Perhaps more important, you aren’t bound by hotel rules. Want to smoke a cigar while facing the beach? No Problem. Want to invite extra family and friends? No problem — you can fit as many in your home as you want.
Disadvantage: It Could Suck
What happens if you aren’t fully satisfied with your vacation home? After all, if it takes two connecting flights and a two-hour bus ride to get to your destination, is it really worth the effort? For everyone, the answer is a clear yes at first but ask again in a year or two and many would change their mind.
Even after you are fed up with your property and looking to sell you will still be liable for taxes and all legal obligations. The process of selling a vacation home could be stressful and bargain-hunters will recognize the frustration and push for a much cheaper price. And you might oblige just to put an end to a multi year-long nightmare.
The Bottom Line: Take Your Time
Buying a home can be the largest investment in terms of money and time. A home is meant to be a pleasant place to start a family or enjoy the finer years of life after retirement. The last thing a second home should be is a financial burden or something to regret.
Rushing into a purchase is the most common mistake many people make. It may be tempting to splurge a big bonus or stock gain but make sure it is done for the right reasons and it makes sense for you and your family.