Do you dream of escaping it all to your very own luxury cabin in the mountains? Or maybe your ideal escape is a beach-side bungalow overlooking the ocean.\r\n\r\nRegardless of what your idea of a dream vacation retreat is, buying a vacation home is often called \u201clifestyle investing\u201d because a vacation home is not just an ordinary piece of real estate \u2013 it\u2019s a lifestyle choice. While owning a vacation home has its benefits, there are some potential drawbacks. You should carefully consider whether this type of lifestyle investment fits your long-term financial plans before making this big-ticket purchase.\r\n\r\nHere are some thought-starters to help you consider whether or not buying a vacation home is right for you.\r\n\r\nQuestions to Ask\r\n\r\nOwning a vacation home is a big purchase - you will want to figure out whether it\u2019s going to be a wise long-term decision for you. Here are some questions you can ask yourself to help determine whether your financial picture supports this purchase:\r\n\r\n \tHow strong is your income?\r\n \tDoes your vacation home have rental income potential?\r\n \tAre you maxed out of your mortgage indebtedness?\r\n \tDo you need to finance the vacation property?\r\n \tDo you plan to own your vacation home for at least five years?\r\n \tWhat is your current net worth allocation?\r\n\r\nUse Personal Capital's free financial tools to understand your net worth and track your finances.\r\n\r\nEvaluate Your Long-Term Goals\r\nIf you\u2019re looking to capitalize on your vacation home investment, you are likely wanting to make a return by renting, selling or retiring at the property. You should know ahead of time whether you are buying a vacation property for a better lifestyle, to make money, or a little bit of both. Some key things to evaluate are how often you will use the property yourself, what your travel patterns are currently and will be in the future, whether you need rental income from the property, and how the property may appreciate over time.\r\n\r\nIf you\u2019re considering a vacation home purchase, you should keep in mind that many factors can drive the local market up or down, including: major employers come and go, weather events can leave lasting environmental changes, and zoning laws are always subject to change.\r\n\r\nUnderstand the Current Market\r\nWhile most of us have lived through the peak and subsequent burst of the 2008 real estate bubble, many of us still seem conditioned to believe that real estate is a guaranteed \u201cwin\u201d after nearly another decade of rapid growth. But it\u2019s easy to make emotional \u2013 and irrational \u2013 decisions when it comes to real estate. If you\u2019re considering a vacation home purchase, you should keep in mind that many factors can drive the local market up or down, including: major employers come and go, weather events can leave lasting environmental changes, and zoning laws are always subject to change. We recommend working with an agent knowledgeable in the area you\u2019re exploring so you can get a good idea of market activity and pricing trends.\r\nConsider What Type of Vacation Home You Want\r\nThere are several types of vacation properties to consider, each with its own set of unique advantages and challenges. Some of these include:\r\n\r\n \tWaterfront houses \u2013 great views and access to the beach, but there can be red tape regarding any property changes, and insurance requirements can be expensive\r\n \tMountain cabins\/ski condos \u2013 potential access to larger acreage at a lower cost than other types of homes, but weather elements can greatly impact your property\r\n \tUrban condos \u2013 easy access to city amenities, but costs associated with HOAs and other property management fees can be pricey\r\n\r\nAnd don\u2019t forget the adage, location, location, location. You want to make sure the location is not only accessible to you, but provides the types of activities you want available to you and your family.\r\nThink About Expansions, Renovations and Remodels\r\nMany experts consider location to be the most important factor for buying a property with long-term appreciation value, but expanding a property also gives you another way to make money in real estate. Property expansion entails creating additional living space that gets input into the property\u2019s value when it\u2019s sold. However, there is a tradeoff when it comes to this, and you\u2019ll want to calculate the cost of expansion in relationship to the value add. And don\u2019t forget, property taxes are based on the value you\u2019ve created.\r\n\r\nRemodeling and renovation are not the same as property expansion, and investing in these will most likely not get you a return on your investment when\/if you sell. But it doesn\u2019t mean these aren\u2019t worth it; buying a cheaper vacation home and then remodeling over time is one strategy to save money. In addition, renovations may give you the chance to rent out your home for more money, if that\u2019s an avenue you choose to pursue.\r\n\r\nThe Takeaway\r\nTo paraphrase Frost, the woods may be lovely, dark and deep, but you have long-term financial promises to yourself \u2013 and to your family \u2013 to keep. There are countless factors to consider before making this type of purchase. So make sure you do the legwork to determine whether buying a vacation home is the right decision for you.\r\n\r\nPersonal Capital financial advisors can talk you through the factors to consider when making these decisions and help you determine how a vacation home purchase might impact your overall financial situation. Learn more about the wealth management services we offer here.\r\n\r\nPersonal Capital Advisors Corporation is an investment advisor registered with the Securities and Exchange Commission ("SEC"). Any reference to the advisory services refers to Personal Capital Advisors Corporation. Registration does not imply a certain level of skill or training nor does it imply endorsement by the SEC.\u200b Past performance is not a guarantee of future return, nor is it necessarily indicative of future performance. Keep in mind investing involves risk.