We commonly read about wealthy celebrities having vacation homes in the mountains of Colorado, on a tropical island or in the French Riviera. Who doesn’t dream of owning a little slice of vacation luxury? It is a wonderful ideal to aim for, but your heart can overrule your head.
More Americans have made the leap toward owning a vacation home. For some, it turns into a place to retire. For others, it may just be a getaway, possibly in the form of a “timeshare” property that allows access to an attractive location for one or two weeks each year. The good news is that there are a wide variety of options to consider. That fact should also encourage you to take your time to make a wise buying decision.
Below are five important issues to consider as you assess the wisdom of making an investment in a timeshare or vacation property:
Be aware of all costs
The purchase price is only part of the equation, but there are other fees to consider. What will it cost to maintain the property when you are away? What are the property taxes? Will you need to do repairs? How much will it cost you to travel to that destination in order to enjoy it?
Location, location, location
It is easy to get caught up in the beauty of a place you are visiting for the first or second time. Be sure if you consider a home there, you know that it is a place you will want to return to again and again.
Rental market possibilities
Your financial decision can be made easier if you know there is potential to generate rental income during parts of the year when you don’t use your property. Is there a market for renters where you want to buy? You need to investigate and possibly be willing to set up rental arrangements.
Think about retirement
Does the home have potential as a place you’d want to retire? Retirement can have a big impact on your investment decision, and give you more leeway in terms of your options. The most important factor is to know this is a location you are comfortable spending most or all of your time when retirement comes.
If you have a home, you want to make sure you can obtain fair value for it when you sell. This is a far more complicated issue with a timeshare, where the resale market is more challenging. Find out what the secondary market is like for timeshare units before making an investment.
The key point is to avoid making snap decisions on any vacation property purchase. Carefully weigh your options and read over all documents carefully before signing anything that commits you to a purchase.
A financial advisor may be able to help identify a plan to buying a timeshare or vacation property. He/she may be able to help you develop a savings and cost strategy for helping you plan your dreams.
This information is provided for informational purposes only and is intended to be generic in nature and should not be applied or relied upon in any particular situation without the advice of your tax, legal and/or your financial advisor.
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