How to Buy a Vacation Getaway
It seemed so much better than a time share. Terry Moerler and her husband recently joined with three other couples to buy a condominium in San Diego. All four couples will have access to the condo for 13 weeks a year — a getaway where Moerler and her husband can spend time with their grown daughter and her children. The couples plan to own the condo for five years, and then decide if they want to continue to own it or sell it.
“We bought it for our enjoyment, but there is an investment aspect to it,” says Moerler, a Realtor in Thousand Oaks, Calif. “It was important for us to buy something that would have good resale potential.”
It’s a decision that a growing number of baby boomers are making. Still smarting from the bursting of the dot-com bubble in the stock market, Americans are snapping up vacation homes with fervor. That may be a good financial move, analysts say, if it lowers your tax bill and cuts down spending that would otherwise be used for holiday travel.
But if you’re banking on huge appreciation in the value of your vacation home, watch out. The best deals have already disappeared, these experts warn.
“One has to be careful,” says Geordie Crossan, a fee-only financial planner and president of NBS Financial Services Inc. in Westlake Village, Calif. It’s “kind of like buying stocks at the end of 1999. The best investments in real estate were probably made three years ago. Unfortunately, a lot of people are buying today — after the rise.”
The number of vacation homes sold last year soared nearly 20 percent from 2003, according to a study released last month by the National Association of Realtors. That rise is part of a larger surge in second-home sales, which accounted for 36 percent of all residential transactions. Most of those second homes are rental properties. But more than a third of them are vacation homes, used primarily by the owners.
While the West remains the hottest market, second homes on the East Coast are also being snapped up, just not quite as quickly.
The rise in interest rates is slowing the market a bit, says Holly McLear, a sales associate at Prudential Prime Properties in Newport, R.I. But she still sees clients from cities such as Boston, New York and Hartford, Conn., who want to buy a piece of “the charm of Newport.”
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