Like many people, you've probably dreamt of owning a vacation property. But is 2020 the right year to take the plunge on a second home? After all, mortgage rates are at a historical low. But this is a time of economic uncertainty. And we don't know when the economy will fully recover from the impact of the COVID-19 pandemic. There's a lot to consider before you invest, which is why Our REALTORS® give you this rundown of the pros and cons of buying a vacation home in 2020.
- Pro: Mortgage Interest Rates Are Hitting Record Lows
If you have the income stability, buying a vacation home in 2020 may make a lot of sense. Mortgage interest rates at a historical low and it's predicted that this will continue into 2021. According to Freddie Mac, the average interest rates in August 2020 dropped below 3% for the first time ever.
- Con: Being Approved for a Mortgage is Trickier
With the coronavirus pandemic, all lenders are concerned with the continuity of income. Pre-COVID-19, only a few employment verifications were needed to approve a new loan. Now there are more stringent requirements and processes to prove that a homebuyer is financially stable and will be able to pay a mortgage.
- Pro: You Can Earn Extra Income
If the vacation home you plan to buy is in one of the most in-demand cities, you could tap into a new source of income by renting it out. Rental property websites like Airbnb, HomeAway, and VRBO have changed how people vacation. Over the last few months, travelers have been staying at hotels much less and instead opting for vacation rentals because they can easily social distance. And don't forget about tax deductions. If the home is rented out for more than 14 days, it can be considered a business, which means you can deduct any business-related expenses.
- Con: There are a Couple of Risks
While real estate is usually one of the best investments you can make, there are several risks associated with owning a vacation property, especially during these uncertain times. To begin with, vacation homes tend to be more susceptible to the effects of economic downturns.
What's more, the area where you're planning to buy might take more time to recover from the pandemic. With this in mind, you should consider how the social distancing measures or the closure of attractions and restaurants will affect the appeal.
- Pro: Buying a Vacation Property is More Feasible Than you Think
You probably know that vacation homes have long been the playground for the rich. In 2020, however, you don't have to be a multimillionaire to afford a second home. The barriers have come crashing down and there are loads of opportunities for potential buyers like you and at lower price points. If you're willing to dig deep or take on a few renovation projects, it can be possible to make your vacation home dream a reality, at a fraction of the cost.
- Con: The Upkeep Can Be Time-Consuming and Expensive
A vacation home is one of the most hands-on investments you can get yourself into. There's a lot of upkeep involved with it and at the very least, you'll have to prep, clean, and restock the property between every guest's stay. There will also be the marketing aspect and unplanned costs for repairs and maintenance.
Before you start looking for Nassau County homes for sale or Suffolk County homes for sale, talk to our REALTORS® to get an insight into the current real estate market conditions and find out if this is the time to take the shot. Contact us today.