The interest rate on a mortgage is currently 2.98% and the house prices are also stable. You can buy a vacation house now and make a profit in 7-10 years.
The Coronavirus has been around for a long time and it has forced us to maintain social distancing and work from home. This new norm has also inspired a lot of people to buy houses in more isolated areas.
This is why the sales of vacation houses have increased significantly. A vacation house does feel like a safe and comfortable place where you can spend time with your family and not worry about crowds or the virus.
These houses are also located near beaches and parks which makes it an amazing stress reliever as well.
There are both emotional and financial reasons as to why you should buy a vacation home. In this article, we are going to talk about the top 6 reasons-
1. Low Mortgage Interest Rates
Obviously, the financial reason is going to be your main motivation and mortgages are your ultimate obstacle when it comes to buying property.
The good news for you is that interest rates on mortgage are now at an all-time low. In July, the interest for a fixed-rate mortgage contract of 30 years was 2.98%.
This was the first time in almost 50 years that the rate went below 3%.
2. Higher Competition But Higher Reward
From the beginning of the lockdowns, a lot of people decided on buying second homes away from the busy city. But were unable to buy as so many agencies had to close down.
But during mid-July, most of them resumed their activity and this resulted in a sudden rise in property sales. This also created a fluctuation in selling prices.
In South Carolina, Most of the demands were for oceanfront houses like the Myrtle Beach Homes for Sale Oceanfront.
There are several reasons for Myrtle Beach properties becoming a popular destination, mainly because the tax rate is lower than average here, and real estate costs are also low compared to other places. Besides, there is the beach factor.
But despite the increased sales, house prices remain stable due to mortgage forbearance. There are a lot of coastline houses that can be bought for $25k-$30K.
The relaxation your vacation home will provide is worth the price which by the way is not that much.
3. A Chance To Diversify Income
Since this is your vacation house, it is reasonable to say that you are not going to shift here permanently.
You may be willing to stay here for a while till Covid-19 is prevalent but afterward, the best option would be to rent out the place.
Beaches and beach houses are popular places to stay, and depending on the location your income may increase significantly.
You could use this extra income from rent to pay off the maintenance and mortgage of your new vacation house.
It is best to consult with a local agent who has expertise in renting out vacation homes. They will be the ones capable of bringing you a better cap rate.
If you rent out the place be sure to be in contact with a good cleaning agency. Health and hygiene will be your tenant’s number one priority. Even after COVID-19, having a good cleaning agency at your side is a good call.
4. Receive Tax Benefits
If you have a modest position in the tax bracket, you can deduct the property tax and interest paid. These will become your tax benefits.
5. Increase Overall Wealth
You will be able to buy your second home or vacation home with a 10 to 15% down payment.
You also do not have to buy it all at once since it is a second home. You can decide on any available financing methods after consulting with an agent to easily get the property.
Then as said earlier, rent out the place to receive monthly payments. This helps slowly generate income to pay off the existing cost.
In about 7 years you should be able to generate enough revenue to pay off about 70% of the total cost of the property.
At present the price of homes is stable, but as the economy gets better the rates will also go up. You can let natural inflation rates take care of that.
After a couple of years, your second home will become a very profitable investment. The depreciation costs of vacation houses are also quite low depending on the location.
6. A Perfect Retirement Plan
You may be decades away from retiring. But eventually, you will need a plan. And investing in real estate is one of the most reliable plans available.
Retiring and living next to a beach or a beautiful park or lake does not sound bad either. Also, by the time you retire, your mortgage should be completely taken care of.
In that case, you can sell your old house, do the necessary renovation of your new permanent house. If it is close to a lake you can even consider investing in a boat or fishing kayaks.
7. A Reliable Investment
Share and stocks may give you high returns, but they also have high risks. Bonds on the other hand have lower risks. But real estate has always been a reliable option.
Mostly because you can physically see and take care of it. It is different from investing in financial institutions or using financial instruments. This is the same reason why a lot of people invest in gold and silver.
You can also take affordable vacations anytime you like. Whenever you are not renting the place, you can pack your bags, travel kit, take a few days off and visit the place without worrying about hotel expenses.
And if you do not want to retire and spend your days there, your second home can be your legacy for your children or you can sell the property altogether. Either way, it is a win-win.
There are both financial and emotional reasons for wanting to buy a vacation home. It is a good, reliable investment and because the mortgage rate is low this seems like the perfect opportunity to hop on the bandwagon.