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How to Choose the Perfect City for Your Vacation Home

 By Tim Anderson and Harry Chandler

Purchasing a vacation home is a great way to ensure that you always have a place to escape, without worrying about crammed hotel rooms and the inconvenience of living out of a suitcase for a week. When you own a vacation home, you can pack and leave at your convenience, because you always have a home away from home ready for you to utilize. If buying a vacation home appeals to you, you will need to choose the right location to ensure that the home remains a valuable, welcome part of your family. Here are some factors to consider as you make the decision.

Convenience to Your Home

First, determine if the location is convenient enough to make a vacation home appealing. How close is the vacation destination to your home? While it is great to “get away,” the reality is that you may not wish to fly every time the opportunity to go on vacation arises.

Especially with the rising cost of airline tickets, you may wish to choose a location within a short drive of your home. Of course, sometimes driving is not an option. If you long for the convenience of a tropical retreat, but you live in the mountains of North Dakota, then go ahead and purchase somewhere tropical. However, before you do, check your local airport to ensure that regular flights are available.

Ongoing Appeal

Your vacation home is an investment that you will use year after year. Before you buy, make sure the area has staying power for your family. You need to buy in an area where your family will want to go annually for vacation. No matter how appealing an area may be the first two or three times you visit, you are investing in years of vacation. Is there really enough for your family to do to be interested long term? The answer to this question is going to depend largely on your family’s vacation style. If you are a lounge on the beach and do nothing type of vacationer, then a cabin on the beach in a remote area is ideal. If you like to see sights and do activities, then you will want to ensure that the city or town nearby has plenty to keep you interested — or even that the vacation home is located near a major amusement park or big city. 

Potential Rental Income

Another consideration is what you will do with your vacation home when you are not using it. Do you want to rent out your property to earn some income when you are not using it? While the majority of vacation homeowners do not choose to rent out their property, if you think you may want this option, you will need to buy in a popular destination where vacationing is common. Consider shopping near the mountains, ocean, a lake or a river.

Potential Investment Value

Vacation homes are, at their most basic level, an investment. Evaluate the location to determine if it will be a wise investment with growing value. In 2014, the number of vacation home sales rose by 57 percent, which is a peak since 2006, according to the National Association of REALTORS. The vacation home market accounted for a full 21 percent of the homes sold that year as well. This means there is currently a strong market for vacation properties. Yet that does not mean a strong market will remain for your vacation property. For that information, you will need to research the area where you are buying with the help of a skilled real estate agent. Choose an area where sales prices are on the way up and where a continuing demand for real estate is projected in the coming years.

Family Interest

Finally, find out what your family thinks. Do they picture themselves vacationing with you, annually, in the same spot? Does the city have enough to appeal to them as well as you? Remember when buying a vacation home you are purchasing your family’s memories for years to come. Make sure those memories are tied to a location everyone loves. With a vacation home, you can build the memories that your family will cherish for a lifetime, and you will also be able to invest in your future financial security. Choose your location wisely, and you will find a vacation home is a welcome addition to your family. 

This article was originally published on RISMedia’s blog, Housecall.

Visit houselogic.com for more articles like this.

Copyright 2015 NATIONAL ASSOCIATION OF REALTORS®

FAQ

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Helpful Numbers

Top 10 Things to Know About Buying a Second Home

One out of three homes sold in 2007 was a vacation home or investment property, showing that demand for second homes remains healthy despite a slow housing market. With homebuyers enjoying an advantage in many markets, now may be the time to buy that second home. Whether you're dreaming of paradise or profit, master these 10 tips for a smart investment.

  1. Resist the urge to impulse buy.
  2. Evaluate your needs and long-term goals.
  3. Get to know the area before buying.
  4. Hire a buyer real estate agent.
  5. Decide what type of home is right for you.
  6. Shop around for a mortgage.
  7. Calculate additional expenses.
  8. Consider fractional ownership to cut down on costs.
  9. Look into tax benefits.
  10. Rent your home out for extra income.
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There are lots of good reasons to want a vacation home, and hardly any of them are financial. There are psychological reasons, emotional reasons, family reasons. These kinds of reasons tend to push financial considerations into the background. But the financial side can't be overlooked. As with any real estate, location counts more than any other single factor. The best vacation properties offer something special -- a view of the ocean, a mountain vista, a dock on a lake. For maximum appeal to potential renters or future buyers, look for a place within three hours' drive of a major metropolitan area. Longer distances or difficult roads make weekend trips a pain, and that limits your market

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The time to INVEST in a second home is NOW

by  Friday, 17 Apr 2015

Vacation home sales rose 57 percent last year over 2013, to 1.3 million properties, well above their most recent peak level in 2006, according to NAR. In fact, vacation home sales accounted for 21 percent of all real estate transactions last year, their highest market share since the survey was first conducted in 2003. NAR found in a survey that 85 percent of vacation buyers think now is a good time to purchase real estate.

Does it make sense to double down on real estate, especially in light of the interest-rate outlook and inventory dynamic?

Three main themes emerge when you consider a real estate investment properly.

1. Only buy a second home from a position of financial strength—gamblers need not apply.

Potential buyers should not consider the purchase of a second property if their job security is in question or it compromises financial goals that are higher on the list of priorities, said Diane Woodward, a certified financial planner with Oak Tree Wealth Management. "Is your own financial house in order?" she said. "Is your retirement in good shape? Are you able to keep up with college savings for your kids?"

Those considering the purchase of a second property should beef up their financial safety net, Woodward said, noting six months to a year's worth of living expenses (that includes the new housing payment) in a liquid interest-bearing account is appropriate.

Historically speaking, the median single-family home has appreciated 5.4 percent since 1968, while the S&P 500 index of blue-chip stocks has produced an annualized return of roughly 6.7 percent. (The value of vacation homes in more popular destinations may grow more quickly, so it's important to research historical price appreciation in any market you are considering.)

2. Additional costs can add up and eat into the benefits of buying a second home.

Craig Venezia, author of "Buying a Second Home: Income, Getaway or Retirement," estimates that insuring a vacation home that gets rented either in part or in full costs about 20 percent more than a primary residence.

Where vacation and rental homes are concerned, due diligence on owner communities is critical. Vacation homes are often built in communities with a homeowner's association, which divvies up annual maintenance fees among its residents.

Lastly, be aware of the added costs associated with owning a second home. You may need to pay a handyman, for example, if you don't live close enough to fix leaky pipes or leaf blow yourself, and flood insurance is often required for properties near the water.

3. The value investment play may have already peaked, so scrutinize deal pricing closely.

With interest rates still historically low, buyers who can afford the costs of owning a rental property may be wise to act now before rates and prices head higher, Bera said.

Yet despite strong rental demand in many markets, investment-home sales have been less robust.

The sale of residential properties purchased primarily to produce rental income, or for potential price appreciation, declined in 2014 for the fourth straight year as rising home prices and fewer distressed properties coming onto the market have reduced the number of bargains available to turn into profitable rentals.

Even so, 68 percent of investment buyers surveyed by NAR indicated they are "very" or "somewhat likely" to buy another investment property in the next two years.

So the iron may be hot for buying a second home, but that doesn't mean it's right for you. Before you saddle yourself with another mortgage, make sure you factor in your other financial goals, research the market carefully, and crunch the numbers to be sure you can comfortably afford the costs. 

"What's more important is what's going on in your personal economy rather than the U.S. economy," Bera said.

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