Buying a Vacation Home - Second Home Investments
Recreation or Investment?
Buying a second home usually means a vacation home. At one time, most people considered this a luxury. It's much more than that. It can also be an excellent investment. Like most real estate, though, think in the long term. While vacation homes often outpace other real estate sectors in appreciation in the hot markets, they fall just as quickly. Most people who gain substantial equity will buy during the "slow" market, and sell when the market heats up. This could be as much as 10 years. If investment is your motivation, it's almost imperative to think in the long term. But, the vast majority of second home owners bought their home for recreational purposes.
If you are buying a second home for an investment, remember that it's no different than any other investment—nothing comes without risk. And, buy a vacation home that you would enjoy. If you enjoy it, so will your guests. Income through rentals and equity can be quite lucrative, and you can enjoy free vacations whenever you want. There's a lot of research that needs to be done, as well as maintenance once you've made your purchase. But there's nothing like a vacation home to increase the dimension of your lifestyle. Unlike stocks, bonds and IRA's, you can leverage much more than your initial investment in a relatively safe environment. And...you can get a lot of pleasure out of your investment while it's earning money for you.
Why A Vacation Home?
Recent trends in the real estate market point to resort communities and desirable vacation areas as the next great real estate boom. Here's why:
- The baby boom generation has come of age, and many are at a point in their lives where they can afford a second home.
- Information technology provides a means to access work opportunities, education, shopping, and entertainment without the traffic, congestion, crime and pollution of the big cities.
- Home equity is often the easiest way to provide money for retirement years.
- Now that many have moved out of the cities and into the suburbs, the next step is into quaint rural towns and popular tourist areas.
Where's the best place to buy a vacation home?
It's where you enjoy being most. Like the ocean? Oceanfront property is often very expensive. But you may be able to find a great spot within walking distance of a beach or seashore. You might even be able to hear the waves, or smell the salt air. If you like to ski, you would look for homes, condos, or land near your favorite ski resort. If you like to fish, swim and boat, look for waterfront or water access property within your means. If an inspiring view puts you at ease, there are many picturesque homes in the mountains and foothills throughout the country at affordable prices.
You also have to consider supply and demand. The most expensive, and quickly rising properties are waterfront. They're becoming scarce, and there's only so much that can be developed. Environmental and community laws are becoming stricter, making it considerably more difficult to build than it was a few decades ago. This is a good thing, particularly when you consider the protections they afford your property and investment.
Resort communities are quickly becoming "connected" via the internet and other information technologies such as cellular and satellite. You can shop online, and buy the best at bargain prices without ever leaving your home. You can go hiking, skiing, snowmobiling, canoeing, golfing or whatever you choose in some of the most beautiful places in the world. And, you can even continue your education via the internet. It's not futuristic anymore. It's here.
Condominiums
If you're considering buying a condo as an investment, you'll want to know a few things. First, find out if there's a rental program within the association that can generate money when you're not using it. There are a few things you should learn:
- What percentage does the rental program take? This figure is usually around 50%
- If you don't like the rental program, make sure you can set up your own
- What are the condo fees per month?
- Is the unit you're considering already in a rental program? What repairs or upgrades need to be completed to get it accepted as a rental unit?
- How are units chosen for rental during slow seasons when occupancy rates are low?
- What's the financial condition of the association?
- How much are utility bills?
- What kind of loans are available for the property you're interested in?
- What amenities are available, not only to you, but to those who will be renting your condo?
- You'll want to see the association documents and go over them with your Realtor and lawyer to learn your responsibilities.
- You'll also want a financial statement showing the rental income over the last 1-3 years.
Yes, there are a lot of things to consider. Each location presents its own set of more specific questions you'll need to ask. If you're already familiar with the area you want to buy into, you've got a great start. Most importantly, make sure you buy something you know you're going to love. You can often rent a condo in a resort where you'd like to buy. Stay for a weekend to see how well it suits you.
Homes
If you want more privacy, and you don't mind the maintenance, then a house is the choice for you. You may not even want to rent your home out to other vacationers. In fact, this may be your telecommuting home. Many employers are beginning to see the advantage of working at home. Most would like to see you face-to-face on a regular basis, but that's changing too. It's still in the trend stage now, but very soon, it'll be in the mainstream...just like automobiles, telephones and TV. Your second home could very well become your primary residence in the near future. Perhaps it'll become your retirement home.
But there are many things to consider, too. What's the demand for the area, and what will it be in the future? Is the home you want to buy a "white elephant"? (For those of you who aren't familiar with the term, a "white elephant" is a very expensive home in comparison to the value of the homes surrounding it.) Many towns have private beaches, for residents only. This is an added amenity. If you're starting to think that your second home could easily become as important as your primary residence, you're getting the picture.
You've always heard that for most people, buying a home is the most important investment in their lives. Buying a second home is equally important. It can affect your financial stability, your future, and you're personal well-being in profound ways. When you're comfortable with the decision, financially able, you've done your homework, and you're ready to enjoy the good life, visit some of the sites in our directory. Most are hand-picked to provide the best information on vacation homes in your area.
For more information, continually updated, read the National Association of Realtors' Field Guide to Vacation Homes. You'll not only learn a lot more about this type of venture, but you'll learn what to expect of your Realtor.
RESOURCES
California Refinance Complete list of California Mortgages listed by city.
US Vacation Real Estate Directory
Buying
Many states now have real estate agents that will represent you, while the selling agent represents the seller. You can have your own agent working in your interest.
A full time real estate agent in a vacation area knows what's on the market and what's new every day. If you've always wanted your own getaway in your favorite destination, click on the state of your choice and find a Realtor who'll work for you.
Selling
When selling your vacation property, one of the most important features in this market is the Real Estate agency's web presence. Most vacation properties nowadays are first located on the internet.
We hand pick most of the companies and invite them to list on our site. Through the links below, you'll generally find real estate companies with extensive internet marketing networks.
