If the thought of escaping to your very own retreat on the
beach, in the mountains or near the small town you grew up
in appeals to you, you're not alone. There are 6.8 million
vacation homes in the United States, according to U.S. Census
Bureau data, and interest is growing.
Be sure the vacation home you buy is something you'll
love today and after you retire.
"With older baby boomers just now reaching 60 years
of age, and younger boomers in their early 40s, the lifestyle
preference of boomers will figure prominently into future
demand for vacation homes," says David Lereah, chief
economist with the National Association of Realtor (NAR).
What are the characteristics of the typical vacation-home
owner? According to NAR's 2006 Investment and Vacation Home
Buyers Survey, they're about 44 years old, with a median household
income of $102,200 a year. Further, according to a separate
78 percent of vacation-home owners are married couples
Eight out of 10 drive to their vacation home
They typically spend 39 nights a year at their vacation
82 percent own their properties fully (mortgages have
either been paid off or the home was purchased in cash)
The typical vacation home in the United States cost about
$200,000. When buying one, home-hunters look for a vacation
home close to:
An ocean, river or lake (two-thirds of survey respondents)
Recreational or sporting activities (39 percent)
Vacation or resort areas (38 percent)
Mountains or other natural attractions (31 percent)
Are You Ready for a Vacation Home?
If you don't fit into the above description (say you're 55
years old and earn $85,000), can you still buy a vacation
home? Of course! But there are some things to consider before
Can you afford it? Consider not only the cost
of the home but also insurance (it's costly to insure
desirable coastal properties), property taxes, utilities
and maintenance costs to keep up the home. (And then there's
- Do you have time to spend there? Americans are
notorious for not
using their vacation time (and even free weekends are
becoming a luxury). Will you really use your vacation home
to make the purchase worthwhile?
A vacation home away from the hustle and bustle of
city life may sound appealing ... but have you considered
how long it will take you to get there, and whether
you'll have access to grocery stores and, in case of
an emergency, health care?
- How will it affect your taxes? Mortgage
interest and property taxes on a second home can be deducted,
according to the National Association of Tax Professionals
(NATP). But, if you decide to rent out your home when you're
not using it (for more than 15 days) your rental receipts
must be reported as income. Also, if you sell your vacation
home, the profits will be taxed as a capital gain.
You're Ready ... But There's More Vacation-Home Quandaries
Determining that you are, indeed, ready to buy a vacation
home brings up a new set of careful considerations that must
be made. To make sure that your vacation home is the cozy
retreat (or the urban getaway) you've always wanted, here
are some top tips to consider.
- Where should you buy? After you've considered
your interests (Do you want a beach house? A farm house
in the country? A log cabin in the wilderness?), realize
that you're going to want something relatively close to
home (not more than a two- or three-hour drive if you plan
to use it on the weekends). Otherwise, you're not going
to want to visit it as often.
Also take into account your future intentions for the
home. If you're going to rent it out, will it appeal to
renters? If you're going to live there after retirement,
will it still be convenient and close enough to a grocery
Finally, think about the year-round climate in the area
(if you intend to use the home all year) as well as access
to health care. No one wants to get stuck out in the wilderness
with a broken leg and a five-hour drive to a hospital.
What kind of home? Next think about what you
plan to do in your home. If it will be just you and your
spouse, a smaller place should do. But what about grandkids
down the road and family who will inevitably want to visit?
Is there room for them?
Should you buy with a friend or relative? Gathering
a couple of relatives or close friends is a tempting way
to buy a vacation home. The home gets more use, and you
get to split all of the costs. If you do opt to go this
route, make sure to put your emotions aside and draft
a contract that spells out who gets to use the home when
(otherwise you run the risk of Uncle Bob crashing your
anniversary weekend), who's responsible for which repairs
(or will you split them?), and what will happen if one
person wants to sell.
Above all else, keep in mind that a vacation home should
be something that helps you to relax and escape the daily
grind. If it ends up bringing you more headaches and worry,
then the vacation home is not doing its job.
Home Renovations are Your Best Investments?
Keys to Protect Your Home When You are on Vacation
Association of Realtors April 30, 2007
Association of Realtors May 11, 2006
Vacation House Hunters