Each summer, many people grapple with the same question: Does it make sense to buy a home in the place they vacation?
Be it the beach, the lake or the mountains, vacationers may ask whether it's time to put down roots in their favorite getaway spot or if it's more prudent to keep paying for hotels and rentals year in and year out.
Development along the boardwalk in Rehoboth Beach, Del., predates current regulations. Properties are selling for $300,000 to $500,000 and have been appreciating rapidly.
(Craig Herndon For The Washington Post)
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The answer lies in how they view a host of financial and lifestyle considerations, including how much time they want to spend in their chosen paradise and how important rental income is to them, real estate experts said.
"We're finding that most people are definitely buying for recreational interest first and foremost," said David C. Hehman, chief executive of EscapeHomes.com. "But it's very common that they will rent it out when they're not using it to defray the cost of ownership."
Last year, Americans bought and sold an estimated 445,000 second homes, up from 359,000 in 2001, according to the National Association of Realtors. The United States is home to about 6.63 million vacation dwellings, with the stock projected to grow by an average 125,000 new units per year in the next decade.
To be sure, a vacation home is an emotional purchase that should be approached cautiously, Hehman said.
"It's not for you if you can't get the enjoyment out of it or if it's going to be a financial stretch," he said. "If it's got to be too far away from you, difficult to get to, if you have kids that have soccer games every weekend and you were planning to make it there, you have to match your use pattern up with reality."
Of course, the decision to own is easier for those who can tap the equity in their primary residence or who fully expect to continue going to the same destination every year, said John Zubretsky, regional president of Century 21 Access America in Weathersfield, Conn.
"It's kind of a leap financially for a lot of people, but when you figure out what you're paying in rent for a place, a lot of times your rent is almost your whole down payment," Zubretsky said.
"Three years' worth of rental on a place is your down payment. On a vacation home you really only need 10 percent down."
Along coastal Connecticut, the average price of a second home is about $350,000, which buys a three-bedroom, two-bath, no-heat house within walking distance of a beach, he said. The area's prices jumped 15 percent last year, and such a place likely would have commanded $200,000 five years ago.
"From the Fourth of July to Labor Day when kids are out of school, they're looking at it as nothing better," he said. "These beaches are pretty much the camp for the family, so to speak. It's relaxed, it's friendly and I think it beats renting."
Those set on a location are wise to buy so they can treat their vacation property like a piggy bank or alternative investment, said Tom Kelly, co-author of "How a Second Home Can Be Your Best Investment."
"We only get so much vacation time," Kelly said. "Why not buy something you can use, that you can rent, that's probably going to appreciate over time?"
