Buying a vacation or rental property.

The first decision is the cost involved in owning, maintaining and keeping another property far from home . These factors should be given serious consideration.

Vacation-home buyers often make down payments of 20% to 50%. Some even pay cash if they’re buying a less expensive cabin or condo. A home-equity credit line drawn on your primary residence is a favorite funding source. Mortgage interest on a second home is deductible on as much as $1 million in principal for both homes combined.

Higher interest rates used to be the rule for mortgages on second homes because lenders considered them a greater risk than loans on primary residences. But these days you should be able to find a second-home mortgage at first-home rates.

If you plan to buy a property for investment purposes, you still have quite a number of considerations to keep in mind. If you use the home more than 14 days per year or it’s not rented that much, the home will be considered a second home and not an investment rental.

You should consider the federal income tax consequences in your decision to own a vacation rental as well. An investment vacation rental property may affect your federal income taxes. Owning a vacation rental home that is rented all the time will give you income to report to the IRS, but you’ll also have deductions from the expenses of owning the home, including real estate taxes, homeowner dues and management fees.

A home in a badly chosen location won’t serve anyone’s goals — an investor can’t resell or rent it, a vacationer won’t enjoy it, and a future retiree may have to pick up and move again. You’ll need to rely on both market research and your own personal preferences. Look into factors like the strength of the local economy, trends in house resale values, convenience and amenities, property tax rates, the quality of local schools and medical care, and more.

The best vacation properties offer something special — a view of the ocean, a mountain vista, a dock on a lake. For maximum appeal to potential renters or future buyers, look for a place within three hours’ drive of major metropolitan areas and airports.

Relocating

Before buying a property in a new country, consider renting a similar home close by. If you plan on using the home year round, it might be wise to rent for each season and experience seasonal climate changes first hand. Many of the agencies advertising here can assist you with short to longer term rentals.

Before making an offer on a home, really get to know the area by visiting several times to explore the neighborhoods and check out the amenities.

The type of home you buy is similarly important. The costs and demands of owning a single-family home are different from those of owning a condominium, townhouse, or co-op. Which type serves you best will depend on factors such as cost, location, and upkeep. For example, condos, townhouses, and co-ops typically require less maintenance, since the areas of the property outside your unit are governed and maintained by a community association (of which you’ll be a member). However, you’ll pay for that maintenance in the form of monthly fees and special assessments.