Is Buying A Lake House Right For You?

Apr 11, 2022

Is Buying A Lake House Right For You?

As we get closer to the summer, many people find themselves dreaming of buying a lake house or other vacation home. And with remote work becoming more common - and the increased flexibility that comes with it - the interest in buying homes with beautiful waterfront views and peaceful settings may be on your mind more than ever.

But before you decide to plunge into buying a lakefront home, there is a lot to think about! You'll want to take the following points into consideration to make sure you're making a sound investment and not simply reacting to a fabulous break you spent in an idyllic location.

CONSIDER HOW YOU'LL USE THE PROPERTY

First, think about how you plan to use the property. Will you make the lake home your primary residence by relocating there full-time? Will it be a secondary residence that you use mostly on weekends or for a few weeks of the year? Will you rent it out when you're not staying there? 

If you are considering renting out a lake home, you might be able to claim the property as an investment, which can impact your tax situation. But you'll want to educate yourself on any municipal or HOA rules related to rentals that might exist in the area. You'll also want to think about features and amenities that guests might want to see in a vacation home, as well as your own personal preferences. Basics such as proximity to stores or strong cell phone and internet connections can make a difference in how attractive (and therefore profitable) your rental is!

BE PREPARED FOR ADDITIONAL COSTS 

Sure, the mortgage interest you can deduct might be a tax advantage, but there are other expenses you should consider. Property taxes may be higher. And when a mortgage is for a second home, banks sometimes will require a higher-than-usual down payment that could be as much as a third of the purchase price.

Insurance costs are often higher for waterfront properties as well. You might be required to purchase flood insurance. Liability insurance is often higher for properties located on the water as the risk of personal injury is deemed greater.

Waterfront properties also require more maintenance due to the weather and location. Sand and water can cause damage to the exterior of a home, and, if tracked inside, the interior as well. And many properties have docks or retaining walls that will require repairs and maintenance.

Since lakefront homes are often in rural areas, you might also have to contend with septic systems instead of traditional plumbing. This will require additional regular inspections to make sure the system is working properly and not contaminating the lake itself.

If you're not going to live at the property full-time, you'll also need to factor in costs for security when the home is empty or property management to oversee rentals and home repairs. These expenses can add up, meaning a waterfront property can cost a lot more than one that is located inland.

OTHER FACTORS TO CONSIDER 

Until you begin researching lakefront homes, there are some factors that could influence your decision to purchase which you never knew about. For example, while you might own the home you purchase on the lake, there's an excellent chance that the shoreline and land it's sitting on might be owned by a power company, a municipality, or some other government entity. You won't have the same property tax obligations that you would if you were able to purchase the land your home is on, but the lease payments on these properties can be costly and the leases themselves lengthy, often extending for decades.

The lake itself is also probably owned by a city or governmental body and is therefore considered public property. Your fantastic access to the water can come at the price of everyone else seeking access at the same spot. Crowds, trespassing, and a lack of privacy can be common issues in popular vacation spots.

Of course, there are also pros - to some people, a lakefront view and the ability to spend time outside and on the water can feel priceless. 

DO YOUR HOMEWORK AND LET ORIZON HELP 

There is a lot to think about when buying a lake house. But if you do your homework, educate yourself on the property, the neighborhood, and any rules or regulations you might have to adhere to, a lakefront home can still be a good investment.

If you want to find the right lake home for you and your family, contact Orizon Real Estate today at 260-248-8961. One of our experienced agents can help you get started.