Now May Be the Best Time to Buy a Vacation Home

Posted on April 19th, 2008 by Erin in Real Estate

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credit: Яick Harris

Though you may have no intention of moving anytime soon, today may be the best time to start looking for a second home. It may sound counter-intuitive in today’s economy, but in fact, falling real estate prices and eager sellers are exactly why this may be your best chance to invest in your next vacation home.

In 2007, median home prices fell an average of 7.7%, and vacation home markets, like Las Vegas and Florida, were down even more than the national average. A soft market is bad if you’re a seller, good if you’re a buyer, so if you think a second home investment might be a good step, ask yourself these questions:

What does your target market look like? When purchasing a new home, whether primary or vacation, it’s important to get a view of the market. Does your target area show good appreciation? How has it been affected by today’s market?
Why are you buying this home? There are many reasons you’d buy a vacation home, but having one, main goal will help. Are you looking for a future retirement home, or rather a place to rent out most of the year? And no matter what your reasons, make sure to rent in your target locale during all four seasons, to make sure you’ll like it there year-round.
How do the numbers really look? Figure out your expenses, including mortgage payments and property taxes and compare that to what it would cost to rent. Make sure you want to be there for the long haul: David Wyss, an economist at Standard & Poor’s, reminds us that if you don’t plan on staying for at least 7-10 years, you won’t recoup you investment.
How strong are your financial credentials? Second-home loans are harder to get than first-home loans, and unless you have a good credit score and a strong income.

Before you make your decision, weigh your options and determine whether you’ll really be happy in a second home, and whether the financials make sense.