5 Considerations Before Buying a Vacation Home

You may not be able to get a vacation from the pandemic, but you may be able to get the next best thing -- a vacation home during the pandemic.

In general, people have been moving this year, COVID-19 or not. According to a survey of 9,654 American adults by the Pew Research Center, 22% say they either changed their residence due to the pandemic or know somebody who did.

Anecdotally, people seem to be snapping up vacation homes. "We are seeing a surge in searches for second homes," says Alison Bernstein, founder and president of Suburban Jungle, a New York City-based real estate firm exclusively focused on buyers leaving the city for the suburbs.

[Read: 5 Ways to Keep Your Vacation Home Safe When You're Away]

Bernstein has New York clients heading one, two and three hours away -- but also as far away as Texas, Florida and Colorado.

"For city dwellers, it is no longer a luxury but necessity," she says. "This has been reflected in the market including the Hamptons, Malibu and South Florida. People also realize that it may be a while before they will be able to actually head out on vacation. The second homes will serve as necessary pandemic hideaways but also as their go-to vacations for the foreseeable future."

But just as planning for a vacation takes a lot of logistics and planning, so does buying a vacation home. So if you're going to make a purchase, there's a lot to consider first.

1. Think About the Pros and Cons

Even if you've made up your mind to buy a vacation home, it's still a good idea to look at the pros and cons -- not necessarily to talk yourself out of it, but so you can be aware of the negatives and possibly minimize them.

You also might find positives about owning a vacation home that you hadn't considered.

For instance, a plus to owning a vacation home is that, like your primary home, it can be an investment vehicle. Land, in general, often increases in value, but in popular areas, like beaches or the mountains, it's practically a given that your vacation home will soon be worth more than what you bought it for.

Another consideration: If you aren't going to live in the vacation home throughout the year, you could rent it out to other vacationers and make extra money.

But the main negative -- the high expense of buying and maintaining a vacation home -- is serious. You're going to be paying another mortgage, plus property taxes, insurance and utilities on your vacation home, just as you do with your primary residence.

There also might be cons that aren't immediately obvious. In two or three years, or maybe five, when the novelty of your vacation home has worn off a bit, are you going to start thinking that it might be fun to go on a vacation somewhere completely different? And will you feel that it's impossible or crazy to take a vacation anywhere else, since you've put so much time and money into your vacation home?

2. Crunch the Numbers

As noted, you might be paying two mortgages as well as double other costs. But there are less obvious numbers that you should also be concerned with, according to Baron Christopher Hanson, lead consultant and owner of RedBaronUSA.com, a business consultancy that operates out of Charleston, South Carolina, the District of Columbia and Palm Beach, Florida. Hanson's consultancy also includes a real estate development startup that specializes in beach and mountain homes. Although, probably due to being a startup, he says business has been slow since the pandemic started.

"Be very careful to account for what your vacation home will totally and actually cost for 12 full months -- including the most common surprises being sprung on vacation homeowners as of late," Hanson says.

Fees can be charges like homeowner association fees, but mostly Hanson is thinking of the hidden costs that come with maintaining a vacation home.

"Will it ever become cold enough for your pipes to freeze and burst? Will you, your family or any guests or renters require additional furnishings or gear or appliances to physically use and live inside and out all year long? Will the property ever become hot or moist enough to encourage aggressive molds, pests or building material decay?" he asks.

He points out that renting your home out may bring in extra money, but it can also cost you, too.

"Random guests typically do not care about your bills, the damage they cause or the furnishings they ruin -- unless you have a property manager that stops by once or twice during each guest rental to restate your house rules and keep an eye on how your vacation home asset is being used," he says.

3. Consider How the Pandemic May Affect the Vacation Home Experience

This is a small thing, but worth noting. A popular type of vacation home is one in a vacation home community, where there are potentially crowds. Which means that the pandemic could make you resent how much you're paying for it.

"One other consideration is to make sure that you are not paying for all kinds of common area amenities like a gym, pool or clubhouse that will be closed, or of no use to you," Hanson says.

[Read: Best Cheap Summer Vacations.]

4. Think About the Down Payment

It may need to be significant. "Second homes can initially alarm lenders. Unless you are paying cash, a 25% to 35% or even 50% down payment may be required to secure a second or third property beyond your primary home. Be sure to have your second home financing well in place before you shop or sign any binding offers," Hanson says.

5. Test Your Assumptions

In case you haven't noticed, when buying a vacation home, you need to be thinking about the cost. A lot.

Along those lines, Chuck Vander Stelt offers anybody thinking of buying a vacation home something to think about. Vander Stelt is a real estate agent and the founder of Quadwalls.com, a real estate agency in Valparaiso, Indiana.

Earlier it was noted that you can rent out your vacation home and make money. But Vander Stelt says you shouldn't buy a vacation home with the idea of renting it out to justify the cost of buying the house. Because what if things don't pan out?

"The short-term rental market is incredibly competitive and already filled with second home owners trying to eke out next month's mortgage payment by attracting a short-term renter," he says. "Unless you are ready to become an expert in marketing your property, your short-term rental income will be pretty inconsequential."

In other words, that rental money is great if you can get it, but don't count on it.

And the thinking that the vacation home is an investment? Well, it may be -- but it also may not be.

[Read: Should You Move to Lower Your Real Estate Taxes?]

"Don't buy a second home as an investment," Vander Stelt advises. "The annual carrying costs and volatility associated with home prices in second home communities makes owning a second as an investment both costly and remarkably speculative. The only winner will be your real estate broker when you buy and sell the home."

All of which is to say, after you daydream about your new vacation home, you do want to challenge your assumptions. Be critical. Perhaps you'll come to realize you can buy a vacation home without any problems. But if it's starting to feel as if you're working really hard to create a financial house of cards that's going to collapse -- hopefully you'll recognize that.

And Vander Stelt isn't trying to talk anybody out of buying a vacation home. He just wants homeowners to understand what they're getting themselves into -- and to buy a vacation home for the right reasons.

"It is feasible to buy a second home if you are really going to get meaningful usage out of the home. If having the second home will improve the quality of your life, you should buy one," Vander Stelt says of vacation homes. "If you will only ever get to use the home less than 30 days of the year, stick to renting other people's properties. Let them pay the taxes, maintenance, insurance and mortgage."