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.
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?"
Kelly advised prospective buyers to figure out how much they would need for a down payment, how much they could rent the property for during the premium weeks of the year and whether the cash flow would be positive over time. "If you're going to be there and go back over and over for decades, it's a no-brainer. If not, it's going to be an investment property."
Even so, people often overestimate the amount of time they'll have to use it for themselves, he said. "Most of the time, the average individual isn't going to get to the getaway as much as they think."
For many families, determining how much to finance can be a sticking point, said Pat Campbell-White, a broker for Re/Max Realty Group in Rehoboth Beach, Del.
"Once they make the decision they want to move forward, their first concern is always price," she said.
Known as a summer playground of Washington, Rehoboth Beach has properties now selling for an average $300,000 to $500,000, and they've been appreciating at a rapid clip, Campbell-White said.
About 56 percent of second-home buyers expect to pay less for it than their primary residences, Hehman said.
Tax breaks can make owning a vacation home more affordable, depending how often it's used vs. rented out, said Laura Washington, associate editor of Consumer Reports Money Adviser, a newsletter.
That's why owners need to keep good records of the days they occupy a second home and the days they rent it out, she said.
Personal use alone or renting it fewer than 15 days a year is the simplest scenario because in those cases you don't have to declare rental income on your taxes, Washington said.
One issue that's emerging for potential vacation home buyers is some areas' local regulations regarding rentals, Hehman said.
"Some marketplaces are actually considering restricting short-term rentals because the neighbors are complaining about garbage and noise," he said, noting that South Carolina's Kiawah Island is grappling with that now.
Home buyers need to choose real estate agents who are up to date on such issues since they can have a big impact on sales, said Guy Trusty, president of Lodging & Hospitality Realty in Miami, which consults with hotel developers.
"If people who buy it want to stay put and rent it out the rest of time, the expertise of the broker has to include knowledge of local government and local ordinances that might prevent those folks from achieving their goal," Trusty said.
Here is some advice to consider before jumping into second-home ownership, according to experts:
* Rent in the locale where you are considering buying for several years before committing to a purchase.
* Estimate how much time you and your extended family will use your vacation property. Be realistic about accounting for life changes, job demands and children's needs.
* Research your potential for rental income. What are the going rates? "For the most part, it's very difficult to make a vacation property a cash-flow type of investment," Hehman said. "Does the initial outlay and monthly outlay work for you?"
* Decide how you will manage the property and whether a house is the right type of vacation-home purchase. "When you come down, are you going to be content cleaning out the gutters, doing the yard work -- how much do you want to do that?" Campbell-White said. "Alternatively, maybe you need a condo."
* Imagine your reaction when a tenant calls with a problem. "If the pipes break and you're in San Francisco and you have a house in Tahoe, there's the hassle factor of trying to get up there or finding a great plumber," Hehman said. "Are you allocating in your mental budget all these additional expenses for upkeep?"
* Talk with the real estate agent about hidden costs and ask about any ordinances that may prevent you from renting your property to others.