7 Mistakes to avoid when buying a vacation home
If you love to travel and prefer to stay in a vacation rental rather than a hotel, owning a second home seems like the best option. The ability to stay as often as you like, the freedom of ownership, and the opportunity to invest - it all sounds like a dream! Although this brilliant option could turn into a money pit and a lot of extra stress.
Here are the 7 most common mistakes we've seen vacation homeowners make, along with recommendations on how to prevent them.
Buying sight unseen
Nowadays, real estate companies are looking to advertise their vacation homes because there is high competition in the market. Understanding that this is a marketing strategy, you need to visit the ideal region first before purchasing a vacation house. Spending some time in the neighborhood will give you a better idea of whether you will visit year after year. Buying your dream house on the internet is tempting but, this choice might prove to be a costly mistake in the long run.
Dalima’s solution: Purchasing a home is an important decision, and we want you to be confident before taking the final step. Our team will help you arrange a visit, so you will have the opportunity to perform a full inspection of the home prior to confirming your interest in the home and purchasing your share. We'll also be happy to arrange an online tour in case it'd be more convenient for you.
Spending more than you can afford
Owning a vacation property should be a satisfying experience, but the financial strain that comes with it may soon diminish that pleasure. You don't want to end up with a home that you can't afford to maintain. You must budget for unplanned expenses in addition to your loan. You must also include recurring costs (pay utilities year-round even if you only use the property sometimes) and an annual budget for unexpected expenses.
Dalima’s solution: Dalima is a new way to own your second home at a fraction of the price and none of the hassle. We enable multiple people to own a second home through our co-ownership model, allowing them to enjoy all the benefits of owning a home without the usual hassle that comes with it. It involves certain costs throughout the year - insurance, taxes, cleaning, preventive maintenance, or repairs are the most important ones. We provide an estimate of the year's costs upfront so you can budget accordingly. All bills and payments are split equitably amongst co-owners.
Assuming is simple to manage a vacation from afar
Thinking about the perfect home, you imagine a house near the beach or in the mountains with surrounding nature. Everything sounds incredible at this point, but you need to consider that traveling more than 6 hours to your second residence can be a problem. It is recommended to get a property within driving distance because if you are trying to take care of regular maintenance jobs or repairs when is too far away then you are in trouble. One alternative to far vacation homes is to subcontract personnel to save you time and hassle, yet if this property is located in a popular destination, those services will be in high demand, making them more difficult to schedule and more expensive.
Dalima’s solution: Dalima takes care of every home that is part of our portfolio. First, we look after every legal and financial aspect involved in homeownership. This includes handling utilities, insurance, and property taxes, creating and maintaining the legal entity that aggregates the co-owners of each home as well as its accounts and legal obligations, and representing the co-owners as required by outside parties, including municipal authorities.
On the other hand, we have our own on-site staff to take care of the actual home, providing high-quality property management services to ensure each home is at all times up to the standards we aim for. We do partner with local suppliers to undertake the necessary maintenance and repairs, and our on-site supervise the correct execution of such duties.
Insufficient insurance coverage
As you might be familiar with insurance, every primary home needs to have insurance, second homes are not the exception, they need house insurance and additional covers such as the risk of catastrophe (depending on location) and losses and liabilities (for rentals). Most of these homes will be empty for a significant time of the year. Imagine that there is gas leakage and no one notice for a month, the consequences might be catastrophic.
Dalima’s solution: All our properties are insured up to the highest standards to avoid any unpleasant surprises. To Dalima, having comprehensive insurance is an essential part of the co-owning experience so each co-owner can have peace of mind knowing the property is fully covered against potential calamities and other co-owners' acts.
Renting a second home to cover the bills
Renting out your second home to cover bills and extra costs while you are away might be tricky. At first, it sounds like a good plan but have you thought about the self-management of the rental and the replacement of furnishing and appliances? Those are only a few things to keep in mind before thinking about renting your second home to pay the bills.
Dalima’s solution: Our co-ownership model allows multiple people to own fractions of a second home which means that you're only purchasing the amount of ownership you'll really utilize. If you are not able to use your scheduled time, you have several options:
- Gift the time to a friend or family member
- Rent the time -- you let us know the time you'd like to rent out and we’ll take care of the rest. The rental income will cover your operating expenses. The actual rental will ultimately depend on the time advance you give us to rent out your days.
- Swap the time -- you would rather visit the Alps instead of sunny Ibiza this year? Let us know through the app and we'll find a match.
Not planning for utility and maintenance costs
Spending just a few weeks a year in your second home doesn’t mean that your bills will stop. Every house has fixed costs like electricity and water and either way you need to take care of it even if you are away. Additionally, depending on your second home, you may need to consider other maintenance costs such as repairs, regular cleaning, pool maintenance. These maintenances need to be done consecutively, and thus you will need to hire someone and hopefully reliable.
Dalima’s solution: Owning a home involves certain costs throughout the year - insurance, taxes, cleaning, preventive maintenance, or repairs are the most important ones. We provide an estimate of the year's costs upfront so you can budget accordingly. On the other hand, we have our own on-site staff to take care of the actual home, providing high-quality property management services to ensure each home is at all times up to the standards we aim for. We do partner with local suppliers to undertake the necessary maintenance and repairs, and our on-site supervise the correct execution of such duties.
Lack of understanding on local property tax rates
Owning a property in the US and purchasing a home in Europe involves different types of taxes. Every country is a different world, and property taxes differ from one area to another. It is crucial to get well informed of all the regulations and taxes when thinking about purchasing your home. Make sure you also include them in your budget. If you fail to do so, you might get a surprise at the end of each year.
Dalima’s solution: Dalima takes care of every home that is part of our portfolio. We look after every legal and financial aspect involved in homeownership. This includes handling utilities, insurance, and property taxes, creating and maintaining the legal entity that aggregates the co-owners of each home as well as its accounts and legal obligations, and representing the co-owners as required by outside parties, including municipal authorities.
More information: https://www.dalima.com