Contextualizing the finance news you need to know.

Somebody get Jimmy Buffett on the horn: During the pandemic, hordes of homeowners flocked to purchase second homes, including vacation properties. ⛱️ National second home purchases have fallen a bit since the trend’s heyday in 2020 and 2021 (as of last summer, purchase rates fell 26.6% year-over-year), but hopeful buyers are still scouting properties from coast to coast.

It’s easy to get caught up in sun-soaked daydreams if you’re considering investing in a second home—but there are a few unexpected expenses to consider. Before you make an offer, ask yourself: With these factors in mind, can you *really* afford that condo in Boca?

Valencia Simmons, a National Association of Realtors-certified (NAR) resort and second home property specialist, owns two homes: one in Maryland and one in Florida. She recommends would-be buyers consider the cost of home insurance—especially if the new property is located in a hurricane zone. “I just got my property insurance renewal for the next period [for my Florida home], and my premium has gone up by 1,000 bucks,” Simmons told Money Scoop.

National Association of Realtors Region 1 VP Joanne Breen, who lives in a Connecticut beachside community full-time, agrees. “If you’re buying in a coastal community, flood insurance is a considerable expense,” she said.

Buying a second home might also mean shelling out more cash up front. “You typically will need a higher down payment than you would buying your primary residence,” Simmons pointed out. “There’s more risk involved with the homeowner not actually being at the property 24/7.”

How much more are we talkin’? Per Bankrate, buyers are typically required to put down at least 10% on a second property. (For comparison’s sake, primary residence down payments can be as low as 3%.)

Say you’ve found the perfect vacation home…but the entire basement needs updating. Breen noted that some popular vacation areas may have renovation restrictions, whether that be due to historic preservation efforts or disaster preparedness regulations.

“I’m always concerned that [potential buyers] are made aware of whatever restrictions may exist in that town on renovations and what they might be facing, should they decide to do that down the road,” Breen said, citing her own home, which is in a flood zone and requires homeowners to comply with a strict set of renovation rules.

“Of course, this is where a realtor comes in. Because getting a realtor who knows the community and knows the area well is very important with these homes. Because they’re aware of the pitfalls better than anyone else,” she added.

Vacation homes make great getaways. Unfortunately, you likely won’t be able to keep an eye on the property year-round—which can get expensive. “You really have to think of, ‘OK, who will take care of my home when I’m not there?’” Simmons explained, citing full-service property managers as well as part-time workers who can help out with everyday maintenance like securing your outdoor furniture in anticipation of a big storm, for example.

On-site help is especially important if you’re considering purchasing a property to use as a vacation rental. “You definitely need someone there to ensure that the guests haven’t damaged anything,” Simmons said. “[And] to report to you if any damage has taken place; you need them to turn the property over, you know, get it cleaned up for the next guests.”

Bottom line: If you’ve got the cash on hand to purchase your dream vacation home, go for it. Just make sure you consider the full financial picture before diving into escrow in Margaritaville. 🍹