Is Now the Time to Buy that Vacation Home?
You’ve become comfortable with the mortgage on your primary residence, your family has started to grow and everyone enjoys a week or two each summer at the mountains or the shore – or perhaps a few days in Florida during the middle of a cold Mid-Atlantic winter.
Is now the time to quit renting and buy that vacation home? The professional realtors at Coldwell Banker Preferred are ready to help you find your answer.
“There’s no reason to make a rushed decision just because you’ve had a great rental vacation,” cautions realtor Dan Tobey. “Remember, that’s why they try to sell you another cruise package before you get off the ship.”
Realtor Joe Herzog agrees. “The first thing to do is look at the finances. Most people either have money saved for a purchase or else have a ‘monthly number’ of how much additional they can afford. You have to be realistic about the mortgage and debt service costs, and a 20 percent down payment is common.” Realtor Ed Acevedo believes another test is, “If you can afford to rent comfortably, you can probably afford to buy.”
Next, where are the other places to invest – or not?
“The Jersey Shore is still recovering from the recession and Hurricane Sandy,” Tobey says. “When money is tight, the first thing to go is the vacation home, so there are bargains to be found. But you have to shop carefully and be aware of long-term risks.” Herzog, who represents the area between Ocean City and Cape May that was less affected by Sandy, says, “Now is a good time to look in about any town in that area. While properties are recovering nicely, they are still down 25% to 35% from what they were in 2006-7.”
The Delaware beaches are riding high, and Tobey says, “A lot of Philadelphians are interested in the areas around Rehoboth Beach, and, while I wouldn’t call them bargains, there are some good values to be found.” The Poconos are still depressed, everyone agrees, and re-selling properties there can be a long-term process.
Unlike a primary residence, vacation homes are often purchased for use by the extended family. Single ownership while sharing expenses is often a workable option. Another option is pooling family resources for joint ownership, but beware of the disadvantages. “Although it might work to share a vacation property with parents, we’re all different, and sibling rivalries over how best to use, maintain and share vacation homes are notorious,” Tobey says.
Another option is buying a vacation home that may become a permanent one. “A lot of my clients purchase Florida rental properties with the long-term plans of retiring there,” Acevedo says. “And Florida is a great investment.”
While shopping for homes while on vacation is a great idea, the best time to actually buy is probably in the fall or winter. “The motivation for property owners to sell is greatest during the winter,” Tobey says. “They are the most willing to make a deal or accept an offer in December or January.” Additionally, buying in winter gives you more months to line up rentals, should you choose to finance some or all of your investment through rental income.
Finally, Herzog points out an added reason to consider buying vacation properties now. “Mortgage interest rates continue to be very low,” he says, “and we don’t know how long that will continue.”
To help make your decision on whether to buy a vacation home now, find an agent affiliated with Coldwell Banker Preferred at cbpref.com.This is a paid partnership between Coldwell Banker Preferred and Philadelphia Magazine's City/Studio