Published DateBy Lindsey Maihos
Recreation or investment? At one time, most people considered a vacation home 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 buy 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, be sure to 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 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. And, you can get a lot of pleasure out of your investment while it's earning money for you.
Recent trends in the real estate market point to resort communities and desirable vacation areas as the next great real estate boom. Information technology provides a means to access work opportunities, education, shopping, and entertainment without the traffic, congestion, crime and pollution of the big cities. 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? 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 Mount Washington Valley and western Maine areas 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 for a recreational area, and it also provides protection for your property and investment.
Resort communities are now "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 this beautiful New England destination. 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 percent.
• 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 (if any) over the last one to three 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. 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, then you're ready to enjoy the good life.