For many people, buying a vacation home is one of the best decisions they will ever make. Spending time in a vacation home can generate wonderful family memories over the years, and there may be some serious financial advantages as well. The key is to choose the right location, as well as the right home. Accessibility, area amenities and rental potential all come into play.

Picking an Accessible Location

As in all real estate purchases, selecting the right location is the main consideration. Ideally, you want to have easy access to your vacation home with convenient transportation options. If you are within driving distance, all the better, but many people board a plane to arrive at their vacation home for a relaxing getaway. For example, Victorian town of Cape May at the southern tip of New Jersey is just a 1.5 hour drive from Philadelphia, but those living further away can fly into the conveniently located Philadelphia International Airport less than an hour away.

Seeking Out a Area Amenities

Even if you want to enjoy a vacation home as a quiet retreat, it is important to have desirable amenities nearby. A variety of restaurants, recreation, entertainment options and convenient shopping are all big pluses for areas surrounding a vacation home. Some locations have special advantages. In Cape May, buyers have the benefit of a charming, small town atmosphere with well-preserved Victorian homes, a beautiful white sandy beach and area attractions like an historic lighthouse, water sports and whale watching.

Doing the Math

Buying a vacation home can save you money on hotels, but it is important to take your finances and expenses into consideration before making a commitment. Speak to an experienced real estate agent who can recommend a mortgage broker to estimate how much you will pay for your monthly mortgage payment, taxes and insurance. You also have to budget for utility bills and maintenance costs like landscaping, exterior painting and repair work. You may need a property manager or caretaker if you do not use the home for extended periods of time. Keep in mind that the appreciation potential of your vacation home may offset some of these costs in the long run.

Assessing Rental Potential

Optimize the financial advantages of vacation home ownership by making sure that the home you choose has excellent rental potential, even if you have no immediate plans to rent it out. It is a good idea to speak to a tax professional to get information about the tax advantages of owning a vacation home. In the event of an economic downturn, renting out your vacation home can give your budget a much needed boost.

Using the Five Year Rule of Thumb

Buying a vacation home instead of renting or staying in a hotel is a good idea if you love the area and you plan on owning the property for five years or more. When you decide to sell, renting out the home until the real estate market reaches levels that make sense can help you cover your monthly carrying costs. Holding on to the property for a few years can also pay off in increased appreciation, and you may also enjoy increased equity in the home.