Lost among the news about the current sub-prime mortgage meltdown is the housing market for second homes. Though the news media is focusing on the problems people are having with their first homes, there is plenty of news not being reported about vacation homes.

Vacation homes are those secondary houses people own at the shore, lake, or other favorite vacation spot. Most are small residences though some owners have lavish estates rivaling their primary home in size and in value. You’ve seen these homes spring up along prime waterfront property over the past two or three decades — houses which dwarf the cottages which once dotted most communities.

If you are already familiar with a particular vacation market, you probably have witnessed a recent trend: plenty of homes are for sale and those that are selling are going for a heavy discount. One of the most stressed markets offering fantastic deals is Miami where a spate overbuilding has forced prices down in a hurry.

For people wanting to come away with a great deal there are some things to consider:

Take Your Time — Finding a vacation home for a very low price isn’t difficult to do. But, pouncing on the first property that comes along can show that you are being too hasty.

Because you’re in a buyer’s market you’ll want to determine a few things first:

• Are you familiar with the area where you want to buy?

• If purchasing a condo, how many units are vacant? There could be a reason why your unit is going for a song — the association managing it could be bankrupt.

• How often do you plan on visiting your second home? Do you plan to rent it out? Would you do better simply renting a home every year instead?

• What are some of the related fees to managing the property — i.e., garbage removal, landscaping, outside maintenance, etc.?

• Based on the information available, will your second home appreciate in value? You may have no plans on selling, thinking that your children will enjoy your home when you are gone. Don’t count on that — they may not be interested in maintaining the property later on.

Financing Your Purchase — many second home buyers tap the equity in their first home to buy their second home. But, you may not want to put your first home at risk by purchasing a vacation home. Consider:

• Will you be able to find financing for a vacation home?

• What rates are being charged? Some lenders avoid second home financing while others specialize in financing vacation homes. Will you have to pay a premium rate in order to finance a second home?

Insurance costs can be a deal breaker especially for homes along the ocean. When Florida and New Orleans were ravaged in 2004 and 2005 by a series of hurricanes, insurance companies jacked up their rates, sometimes three- or four-fold to cover their risks. Can you afford to pay $4000 in homeowners insurance annually on your beach property?

The good news is that many second home markets are likely to be depressed for the next few years, taking the pressure off of you to make a fast decision. Look around, shop around and you’ll come up with a deal that is fantastic and one you can live with for many years.

Tags: beach house, beach rental, lake house, Miami, resort, second home, vacation home

This article is one in a series of occasional articles discussing the purchase of a second home whether for vacation or investment purposes.

I mentioned last week that the second home market is worth considering right now, if that is something that you think might be right for you. Granted, not everyone has the funds to swing a second residence, but if you do there is a good chance you’ll pay less for the property than what it would have sold for in 2006.

As appealing as a second home may sound, whether for your personal enjoyment or as an investment or both, there are some things to mull over before you take the plunge. Owning one home can take up enough of your time; owning two homes could eat up all of your free time.

I Have A Story To Tell

Quite a few years ago I was living in New Jersey and working for an aviation company just outside of New York City. Half of our team was based in NJ, the rest were working on Long Island, NY. One fellow who worked at our NY office had a cottage at the shore, the Jersey Shore mind you, and he owned this home with two other siblings.

Victor, as I will call him, lived in New York and traveled to his beach property several times during the summer. From our NJ office the trip could be done in 90 minutes, but from his NY home it would take 3-4 hours each way.

One thing I realized about Victor was that he was always tired and he got sick a lot. I soon learned that his second home was partly to blame for his fatigue as the commutes to the home were wearisome and the work he had to do while there was burdensome.

I also discovered that:

• Most of the maintenance tasks to keep the shore home up were being done by him, without any help from other family members.

• These tasks included painting the windswept home every few years, replacing rotting fascia, winterizing the home at season end, cleaning gutters, putting furniture away, visiting the home a few times over the winter months to make sure that everything was okay, and handling whatever other emergencies came up.

• Property taxes for this beach house was rising quickly as many residents decided to live locally year round, putting a strain on the school system which had to hire new staff, build or renovate schools, etc.

I could go on, but I must tell you that after hearing his story I lost what little interest I had in a second home when I understood how wearisome and burdensome owning a shore retreat can be. Even if Victor owned the home by himself, he would still have been responsible for all the tasks I mentioned.

Choosing A Better Way

Even though Victor’s situation was extreme, owning a second home can still be a viable option, particularly if some of the responsibilities of maintenance and upkeep are shifted to other parties.

A second home can be a good option if:

The home is within driving distance of your current residence. Or, the commute is enjoyable (unlike bumper to bumper traffic on the Garden State Parkway!)

Your home is in a planned community where association services take care of all outside work including lawn maintenance, trash removal, and the like.

The home is turnkey — no maintenance is needed, all you have to do is stop in and enjoy the place. Condos and townhouses are usually the best option in these cases.

I’m not sure what Victor is up to these days, but I wouldn’t be surprised if his ball and chain situation hasn’t changed all that much. Maybe he is satisfied with this type of arrangement (you could be too), but if not there are other ways to enjoy resort living without going crazy.

Thankfully, the second home market is robust and bargains can be had especially in markets with bloated inventories of homes available. Happy shopping!

Resources

Home Remodeling, Home Improvement

Home Mortgage Guide

Smart Guides and Tips For Buying a Home

Tags: beach home, mountain home, resort living, second home, townhouse

This article is the first in a series of occasional articles discussing the purchase of a second home whether for vacation or investment purposes.

If you are in the market for a second home, you know — that beach or mountain house you always wanted — 2008 is shaping up to be a very good year for you to make your move.

Although some homeowners are finding it difficult to even keep up with their monthly payments, a significant number of consumers are looking at expanding their real estate holdings by purchasing another home.

Home Prices Have Declined

What is fueling the demand for second homes? Answer: the recent decline in home values has suddenly made buying a home at the shore much more affordable.

In the April 2008 issue of Money magazine, Your Money & Your Life columnist Jean Chatzy shared her desire to buy a home on Long Beach Island, New Jersey. This popular summer beach destination has seen home prices increase by as much as 25% annually until last year when the market reversed course, sending prices down by 13%.

Know Your Housing Market

Of course, the drop in prices in one vacation market doesn’t translate into an across-the-board decrease everywhere else. If you are searching for a bargain, then you’ll need to do your homework before investing:

• Obtain real estate comps (comparables) for homes in your desired market. A knowledgeable real estate agent can get this information to you and provide valuable information about local market trends.

• Read up on the area that interests you. Let’s say that you want to buy a home in Kure Beach, NC. Google the town and find articles discussing the town’s future, taxes, building rights, etc. Visit the town’s website for additional town news.

• Visit again and again. You may like a certain community in the summer, but not in the off-season. If you plan on spending time at your second home in the winter months, will there be enough for you to do to avoid boredom?

• Talk with a mortgage lender. You may be in terrific shape financially, more than able to meet your current obligations, with plenty of cash left over. Visit a mortgage broker now to see just how much home you can afford — financing rates for second homes have dropped in recent months.

Shop Around For Your Second Home

Finally, if you have decided that a second home is right for you, then shop around. With home values down in many areas, you could shave tens of thousands of dollars off of the asking price for some homes that an owner all to willing to quit. Your mortgage pre-qualification letter will come in handy at this time, just the right tool to help you make your best deal in 2008.

Resources

Buying A Home

Home Purchase Loans

Mortgage 101

Tags: beach home, beach house, mountain property, refinance, second home, shore property