A second home can prove an excellent investment as well as a great family getaway, from a beachy retreat to a wintry refuge. If last year’s numbers hold, one in 10 American homebuyers will purchase a vacation home in 2011.
Reasons to buy a second home now
According to the National Association of Realtors, the median vacation-home price dropped to $150,000 last year, a whopping 11.2 percent lower than $169,000 in 2009.
“Vacation properties are so ridiculously cheap right now that I think people will look back in 10 years and kick themselves for not buying,” says Christine Karpinski, author of How to Rent Vacation Properties by Owner: The Complete Guide to Buy, Manage, Furnish, Rent, Maintain and Advertise Your Vacation Rental Investment, who also travels the country conducting second-home seminars. “This is the right time to be buying the home you want to retire to. A great location, one that’s convenient to an airport or relatively close to home, is also good, but the bottom line is you should love the place.”
Buy or rent?
No one can dispute the pride of ownership, particularly for your own vacation property. But options abound for a second place. The American Resort Development Association highlights the following:
Fractional ownership of a property, which costs less up-front, removes the need to pay for repairs and maintenance, but typically includes annual dues.
Timeshares or weekly purchase programs, which saw a 35 percent decline in sales volume between 2008 and 2009 largely due to the weak economy.
A “condo hotel” or hotel room sold as deeded ownership for either corporate housing or private parties.
Purchasing trends
According to research by Lawrence Yun, chief economist of the National Association of Realtors, 34 percent of vacation-home buyers plan to retire to a second-home property. When hunting for your dream house, consider the following guidelines from the National Association of Home Builders (NAHB) for “aging in place” — i.e. properties with great amenities for seniors:
A master bedroom and bath on the first floor
Lever-style door handles
No change in levels on the main floor
A low-maintenance exterior
An open floor plan, especially in the kitchen/dining area
Do your due diligence
Scour the fine print when purchasing a second-home with a close eye to codes, covenants, homeowners or condo associations so dues, deeds, and restrictions come as no surprise.
Gated communities offer a measure of security for off-site owners while some homeowners associations include landscaping and exterior maintenance on single-family dwellings.
According to the American Bar Association and neigborhoodlink.com, most HOAs:
Levy and collect dues
Enforce rules on exterior home improvements and condition
Maintain recreation facilities like pools, tennis courts, or clubhouses
Provide security services and snow removal
Organize activities and meetings for residents
How to pay for it
So you’re pumped for the purchase! Here’s the good and bad news: While interest rates hover at historic lows, the mortgage crisis has forced banks to tighten lending restrictions. Many banks now require up to 35 percent down to greenlight a loan. As a result, cash deals have made a comeback.
Condo financing remains more difficult than financing for traditional houses. For instance, many lenders now require that a majority of a building’s units — in some cases up to 70 percent — be owner-occupied before they’ll offer financing.
Keep the taxman in mind, too, while crunching numbers. The IRS currently allows homeowners to deduct mortgage interest up to $1.1 million on both a primary and vacation home. That rule, plus state and local taxes as well as homeowner’s insurance, however, is subject to change.
Second-home hunting tips
By Lisa Martin
A second home can prove an excellent investment as well as a great family getaway, from a beachy retreat to a wintry refuge. If last year’s numbers hold, one in 10 American homebuyers will purchase a vacation home in 2011.
Reasons to buy a second home now
According to the National Association of Realtors, the median vacation-home price dropped to $150,000 last year, a whopping 11.2 percent lower than $169,000 in 2009.
“Vacation properties are so ridiculously cheap right now that I think people will look back in 10 years and kick themselves for not buying,” says Christine Karpinski, author of How to Rent Vacation Properties by Owner: The Complete Guide to Buy, Manage, Furnish, Rent, Maintain and Advertise Your Vacation Rental Investment, who also travels the country conducting second-home seminars. “This is the right time to be buying the home you want to retire to. A great location, one that’s convenient to an airport or relatively close to home, is also good, but the bottom line is you should love the place.”
Buy or rent?
No one can dispute the pride of ownership, particularly for your own vacation property. But options abound for a second place. The American Resort Development Association highlights the following:
Purchasing trends
According to research by Lawrence Yun, chief economist of the National Association of Realtors, 34 percent of vacation-home buyers plan to retire to a second-home property. When hunting for your dream house, consider the following guidelines from the National Association of Home Builders (NAHB) for “aging in place” — i.e. properties with great amenities for seniors:
Do your due diligence
Scour the fine print when purchasing a second-home with a close eye to codes, covenants, homeowners or condo associations so dues, deeds, and restrictions come as no surprise.
Gated communities offer a measure of security for off-site owners while some homeowners associations include landscaping and exterior maintenance on single-family dwellings.
According to the American Bar Association and neigborhoodlink.com, most HOAs:
How to pay for it
So you’re pumped for the purchase! Here’s the good and bad news: While interest rates hover at historic lows, the mortgage crisis has forced banks to tighten lending restrictions. Many banks now require up to 35 percent down to greenlight a loan. As a result, cash deals have made a comeback.
Condo financing remains more difficult than financing for traditional houses. For instance, many lenders now require that a majority of a building’s units — in some cases up to 70 percent — be owner-occupied before they’ll offer financing.
Keep the taxman in mind, too, while crunching numbers. The IRS currently allows homeowners to deduct mortgage interest up to $1.1 million on both a primary and vacation home. That rule, plus state and local taxes as well as homeowner’s insurance, however, is subject to change.