While purchasing a second home is a dream of many, the reality is that it isn’t a decision that can (or should) be made lightly. It can make financial and logistical sense, but only if you ask yourself some serious questions.
Here are eight things to think about before taking the exciting (but slightly overwhelming) leap, and buying a holiday villa.
1. Can I afford it?
Despite popular opinion, real estate is not a liquid investment. You can’t presume or even count on the fact that you will be in a position to sell your holiday villa for a profit or even break-even — especially in your first few years of ownership.
There are definitely specific locales that are more likely to increase in value than others, Cassia at The Fields in Dubai being one of them. But it is up to you to do your research and speak with knowledgeable real estate professionals in your desired area.
2. Have I calculated all the costs?
When asking yourself whether or not you can actually afford a holiday villa, it is crucial that you keep in mind all of the costs. The price tag on the property is only a part (a hefty chunk, but still just a portion) of what you will need to spend.
Calculate the cost of utilities, HOA or condo fees, property taxes, insurance and the cost of furnishing a new home even down to the forks, candles, and rugs.
Bear in mind that if you are buying a holiday villa in a resort area, you and your family may also want skis, snowboards, kayaks, water toys or other gear. Oh, and don’t forget the travel costs to get there and back!
3. How often am I going to be able to visit?
Speaking of travel costs, another area where you need to be realistic is when it comes to how often you are genuinely going to be able to visit.
It should go without saying that your holiday villa should be in a destination that you love and want to return to often (have you seen the Meydan Villas in Dubai or holiday villas in Thassos, Greece?)!
That being said, take into account the price of roundtrip travel, your ability to get time off work or your children out of school, and the length of travel time and the time differences.
4. Am I interested in renting out my holiday villa?
If you aren’t going to be able to frequent the villa often enough to make the purchase advantageous, then consider renting out your unit. In addition to the monetary benefits, it will also ensure that your holiday villa isn’t sitting uninhabited for lengthy stretches of time.
However, if you do choose to rent out your holiday villa, you must be aware that this route will also come with expenses. For example, in between tenants, you will be required to pay for cleaning. You may also have to invest in advertising your villa, and possibly even for property management.
Furthermore, if your holiday villa is located in a resort, there is a good chance the resort will be required to take a percentage.
5. Am I even allowed to rent it out?
First things first, not all holiday villas can be rented out. With the growth of sites such as Airbnb, many condo associations and cities have set specific rules for rentals.
As mentioned previously, some resorts may also necessitate you to utilize their in-house programs, which will decide specifications for things such as interior furnishings and amenities.
If you are considering renting out your second home, make sure to research the specific rules of the community or neighborhood thoroughly prior to making an offer.
6. What is the realistic calculation of my return on investment?
For many people, owning a vacation home is part of their overall investment strategy. If this is the case for you, ensure that you are not being blindsided by the longing for a second place, and make sure it is actually a smart money move.
Sit down with your accountant or financial advisor, and estimate a realistic calculation of your returns, and then compare it against other uses of the same money.
7. How will I protect the villa when it is unoccupied?
The fact of the matter is that unoccupied homes invite unwelcome guests or intruders. For this reason, safeguard yourself and your belongings, and take steps to prevent your holiday villa from appearing uninhabited.
Your plan of action may include installing lights on timers, or asking friends or neighbors to come over, collect the mail, and park in your driveway. Brainstorm ways to make it not so visible that someone isn’t permanently home.
8. Do I have a foolproof plan for emergencies?
However, in the case of an emergency, you want to guarantee you have a plan of action. If you are unable to visit the villa regularly, identify someone who can.
Within the first couple of weeks of owning the home, introduce yourself to a hardworking and trustworthy handyman or better yet, a property manager who can arrange for any repairs quickly and safely.
After discussing these questions with your family, you will be in a sensible mindset to make the thrilling decision to add a second home to your family’s lifestyle!