Home prices continue to fall and there are some great deals for buyers looking for a vacation house. Here are several things to know before taking the leap.
Now is a good time to leap.
In many second-home hot spots, prices are still close to their five-year lows. According to Fiserv, single-home prices in Napa, Calif., for example, are down 47 percent from their 2006 peak; the average house in Ocean City, N.J., costs 24 percent less than it did in 2006. And though a few hard-hit markets like Las Vegas, Tucson, and Miami could fall a bit further, most economists believe the biggest fails are behind us.
Meanwhile, sales in places such as Myrtle Beach, S.C., and Palm Beach saw double-digit increases last year. “Now prices are starting to move up,” says Myrtle Beach broker Rod Smith.
A home is a better deal if it’s rentable.
You may think you’ll keep the retreat all to yourself, but it’s still smart to shop as if you’re going to rent the place out. That’s because a home’s rental potential can affect its resale value, said Fredericksburg, Texas, agent Catherine Jeffrey.
Before you bid on a house, make sure the homeowners association or township allows short-term rentals (many do not). And keep in mind that renters prefer homes with at least one bathroom for every bedroom, states Jeffrey.
Don’t count on rental income to pay your bills.
The typical property rents out just 17 weeks a year, reveals Christine Karpinski of vacation-rental site. Plus, you’ll need to pay for cleaning, maintenance, insurance, and maybe management fees (at least 15 percent of income).
To get a handle on a home’s rental potential, ask a management company for a history of rental dates and rates for homes comparable to the one you’re considering. If your monthly loan payment is less than or equal to one peak week of rent, you’re likely to break even, says Karpinski.
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