6 Hidden Costs of a Vacation Home
If you are one of the lucky few who are considering purchasing a vacation home, then you need to consider all of the costs that you might face. Vacation homes can be lucrative investments, but they can also be quite expensive. Knowing what to expect can help you plan effectively and ensure that you don’t end up with a money pit.
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It is important to note that things like property taxes and repair costs could range significantly depending on where you buy. For example, a vacation home in Palm Springs, California, may face adverse weather conditions such as extreme heat and damaging winds, whereas a cabin in the mountains might see frozen pipes if left unattended during the winter. So, before you sign closing documents, here are just a few of the potential hidden costs of a vacation home.
Property Taxes
Property taxes are an important, albeit frustrating, part of homeownership. As explained by Rocket Mortgage, property taxes are based on a county or local tax authority’s assessment. The property tax is separate from a mortgage and can be paid monthly or biannually in most cases. Property taxes differ by state.
Hawaii has the lowest real estate tax rate at 0.28%, according to Rocket Mortgage. Therefore, on a $615,300 home, a property owner can expect to pay an annual property tax of $606. At the other end of the spectrum, New Jersey has the highest real estate tax rate at 2.49%. If you bought an averaged price home in the state at $335,600, you’d pay an eye-opening $5,419 in annual property tax.
More Options: 5 Affordable Up-and-Coming US Locations To Buy Vacation Property in 2023
Home Repairs
Home repairs are another unexpected expense that catches many homeowners off guard. As reported by CNBC, “Homeowners spent up to $6,000 on average on repairs and maintenance in 2022.” Home repairs can be even pricier on vacation properties since you may not catch them before they become a huge problem.
Having someone routinely check on your vacation home and perform routine maintenance can help you cut down on some of these costs. It can also help you avoid a headache. It is a real drag to show up for a vacation only to find out the home is flooded from a busted pipe or raccoons have infested the attic.
HOA Fees
Homeowners Association (HOA) fees are a common practice, particularly in newer neighborhoods. The monthly payments usually go to the upkeep and maintenance of communal areas. HOA fees vary greatly depending on where the home is located and the number of amenities in the community. This fee can range from as little as $25 to several hundred dollars per month.
Property Management Costs
If you are hoping to obtain rental income from your vacation property purchase, you might want to consider a property management company. A property management company can help to maintain the home, find renters and handle any other obstacles that may arise. Costs differ significantly depending on the company and may include a one-time fee, a monthly fee and a percentage of the total rental.
Household Item Replacements
Vacation properties are notorious for needing regular replacements. Whether they are beachside cottages or sit atop a snow-covered hill, the properties may face harsher weather than a typical home.
If, like many, you decide to rent out your vacation home, you are looking at even more wear and tear. It is important to not only take into consideration the cost of furnishing your home but also the expense of replacing any household items that get lost, stolen or damaged.
It is a good idea to visit your property regularly or hire a professional to check on your home. Maintaining your property can help prevent costly damage-related replacements down the road.
Utility Costs
Finally, those pesky vacation home utilities can become quite costly if you aren’t careful. As reported by Move.org, Americans spend approximately $290.79 per month on utilities. The site lists “essential utilities” as “electricity, natural gas, water, and sewer.” With a vacation home, your costs may be substantially lower since you are not in the home year-round. However, forgetting to turn off things like the air conditioner could see you wasting hundreds of dollars each month.
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This article originally appeared on GOBankingRates.com: 6 Hidden Costs of a Vacation Home
