Vacation Homes: Rent or Buy
By Ilyce Glink

Vacation homes are a hot commodity this time of year. The Great Recession may be upon us, but it's vacation season. And for many people, that means heading for a vacation home.

A few weeks ago, my husband and I headed to Northern Wisconsin to visit our son at camp. We were amazed at how many for-sale signs littered the roads. The North Woods are dotted with lakes, around which you can find everything from 75-year old cottages to brand new McMansions. Inventory is a big problem and homes don't appear to be selling that quickly.

But many are for rent.

According to HomeAway, a collection of popular vacation rental Web sites that offer more than 400,000 vacation homes in 120 countries, two-thirds of vacation homeowners reported that vacation bookings were the same or better than 2008.

More than half of vacation homeowners surveyed said they needed to rent their vacation home to cover costs due to the economy.

But the economy hasn't affected everyone. The HomeAway vacation homeowners' quarterly survey said that 12 percent of those who already own vacation homes either bought one in 2009 or were thinking about buying one. Historically, just 6 percent of home buyers bought vacation homes.

Our neighbors are in New Hampshire, visiting with friends at their lakeside vacation home, trying out the concept of vacation homeownership. They're starting to talk about renting or perhaps even buying one for next summer.

There's an American mythology about vacation homeownership. There are images of idyllic afternoons by the lake or swimming pool, small towns with farmers' markets on Saturdays, and lazy summer evenings roasting marshmallows and watching fireflies.

But vacation homes require at least as much work as your primary residence, and perhaps more because you're not there every day, or even every week.

If you're renting out your vacation home, you'll need to hire a cleaning service to make sure the property is presentable for the next guests. You'll need to restock kitchen and bathroom basics that tend to disappear (e.g., spoons, towels and keys) or break (e.g., dishes).

You'll have to replace worn-out linens, furniture, carpet and charcoal grills. And, you'll need to make sure you get your money upfront, before the guests stay.

And then there is the cost of advertising, which is less than it used to be thanks to the Internet, and paying the property manager to manage the rental. If your vacation home is in a vacation community such as Keystone, Colo., management takes a huge chunk of your vacation rental fee, leaving you perhaps half, after maid service is paid for.

Even if you're not renting your vacation home, someone has to do all of the maintenance and upkeep, such as mowing the lawn, cleaning the gutters, spraying for pests (thanks to Barry in D.C. for that reminder), making the necessary repairs, and sweeping the cobwebs out from the corners.

(If you only visit your vacation home once a month or so, you might spend all weekend getting it back into shape, only to run out of time to enjoy it before heading back to reality. Our friends Ruth and Lane opted to rent their vacation home to someone else year-round because their real life got so busy that all they did at their vacation home was work!)

It's hard to imagine how the economics worked for a vacation property rental earlier this decade. Most vacation properties don't rent out year-round, and even if they did, property prices were too high until recently to make the numbers work. If you wanted to defray your own expenses, you could, but breaking even was a stretch for anyone who bought at inflated prices.

But now, as Professor Robert Shiller of Yale points out, home prices have fallen so much that affordability is at a 40-year high and prices in some areas are back to the levels seen in 2001. Vacation home prices have crashed in many vacation destinations as well. If you're looking for a sunbird destination, Phoenix, Las Vegas and Florida are half-off. This could be the best time in a generation or two to buy the second home you've been dreaming of all these years.

Of course, credit restrictions might dampen your dreams slightly. You may need at least a 25 percent down payment for a second home these days, plus more for reserves. But interest rates are still at near-historic lows. If you can qualify, you can get a loan on a vacation home just about as cheaply as for a primary residence.

But plan on buying a vacation home you're going to use and enjoy. After all, that's what vacations are all about.

Ilyce R. Glink's latest book is "100 Questions Every First-Time Home Buyer Should Ask: With Answers from Top Brokers from Around the Country" If you have questions for them, write: Real Estate Matters Syndicate, PO Box 366, Glencoe, IL 60022 or contact them through Ilyce's Web site, www.thinkglink.com.)

 

 

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Ilyce R. Glink's latest ebooks are "Save Your House From Foreclosure" and "The Clutter Collector: How to Get Rid of Clutter Everywhere In Your House," which are available at her Web site, www.thinkglink.com. If you have questions, you can call her radio show toll-free (800-972-8255) any Sunday, from 11 am-1 pm EST. You can also write to Real Estate Matters Syndicate, PO Box 366, Glencoe, IL 60022

 

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