Home Away From Home
|A second home can be a great place to get away, as well as provide rental income year round.|
Ahhsummer. Theres nothing like it. Children yearn for it; the humid weather signals it; and adults begin to look forward to vacation. And what better place to relax than at a place you can also call your own? A second home has much to offer: familiarity, simple decor and lifes little extras. In short, its a home away from home, but far from the hustle and bustle of city life. Whether your preference is for the mountains or for the beach, vacation homes are simply a pleasurable extension of your day-to-day house.
A growing trend
June officially begins the summer travel season. And it seems that most Atlantans are still planning summer trips despite recent economic times. Pam Fox, manager of the Marietta branch of the American Automobile Association (AAA), says they have not seen a decrease in travel plans within the United States. In fact, there has been a steady increase in family travel in the last few years to places that are accessible [from Atlanta] by automobile, she says, citing steady gas prices and September 11 fears as possible causes for close proximity vacations.
Gus Grader agrees. As CEO of Prestige Log Builders in Young Harris, he says his company has seen a definite increase in business from Atlanta. After September 11, people wanted out of the cities to find a place where they could protect themselves and their families, and the mountains seemed to be that refuge that they were looking for, Grader says. The concept of a snug, simple log home that is luxurious in amenities was the perfect marriage of Atlantans taste.
If nothing else, a good investment in equity
Generally speaking, real estate is a sound investment, so second homes can offer some stability and portfolio diversity in times of economic trouble. I initially purchased my [second] home in Blue Ridge as an investment, says Vinings resident Suzanne Klarer, adding that the decision was based on future earning potential. Eventually, she hopes to sell her Blue Ridge house and upgrade to a bigger and better vacation home.
Dianne and Ken Spitzform share a similar story. When the stock market took a turn for the worse about three years ago, the Spitzforms decided to take their money elsewhere. As locals of Amelia Island in Florida, they purchased five properties in the area hoping to reap the appreciation potential that was being experienced by the recent completion of two nearby luxury resorts.
Vacation homes can also offer a second possible source of investment income through renting proceeds. By opening your home to other vacationers, you welcome the potential for profit above and beyond equity. But with any large decision, there are risks and things to consider.
Location, location, location. Is the property you own in a desirable location, close to amenities and/or local attractions that would allow it to command a rental fee to make it worth it?
Availability. How often do you plan to visit your second home? Are you the type that wants to visit your home whenever you please? Would it bother you to have to schedule visits around peak seasons? If you are a spontaneous traveler, then renting your home out may not be your best option.
Maintenance. In terms of physical maintenance, rental properties are no different than primary houses. There is always routine upkeep that must be performed and looks that need to be updated. But monetarily, commodities and services are more expensive in remote or resort locations. Also, think about how much time youll have to perform the maintenance yourself. Will you need to contract out these services? That could be an added expense. Also, maintenance has to be done when the property is unoccupied.
|Your vacation home can also be a source of income, but there are many risks and things to consider.|
Do you have time to manage the renting process? When you open your home up to others, you are going to need to be able to check on it from time to time. Youll need to consider if you not only have the time to make and schedule the reservations, but also if you will be able to clean up after each guest. If not, youll have to hire a service to do it for you.
Wear and tear. Hopefully, youll have courteous renters by and large, but do expect an increased amount of wear and tear that you wouldnt find in an average home.
Additional costs. As stated previously, things cost more in remote or resort locations, so exterior and interior items such as a new roof or carpet, as well as intangibles such as property taxes, rental insurance and association fees will be higher. Youll also need to spend some money to advertise your vacation home. Finally, if you cannot do it, youll have to hire a management company and maid service to ensure a smooth rental experience for each guest.
What can you expect to profit?
Dalton natives Peggy and Roger Rollins have been in the residential property rental business for more than 25 years. As seasoned veterans, they prefer to do the management themselves in order to save money and not water down the appreciation of their property that has been averaging 10 to 15 percent per year. If you are willing to advertise your units on the Internet and manage them yourself, then you may be able to break evenprobably not, but maybe, Rollins says. Just dont expect it to be easy, because its not.
If you do obtain a property management firm, you should expect to pay 25 to 35 percent of your gross rents out in management costs, so dont expect to cash flow a leveraged vacation rental property. The current wisdom is that even if you have to feed the property to keep it going, youre still getting ahead due to the rate at which the property is appreciating, Rollins explains.
The skys the limit
Regardless of whether you rent the house out or not, a vacation home is certainly an extension of ones primary house. Yet, this extension can be in two different directions. Some people prefer to make their vacation home a sort of wish list of things they dont have in their primary home. Especially when building new, these extras such as Jacuzzis, private saunas and indoor pools are easily added without the constraints of city construction. Similarly, others prefer a much simpler style with the cozy less is more theory in place. Regardless of style, both approaches bring a sense of peace and relaxation to the home.
Typically, in terms of interior design and decor, the feeling is one of a more casual nature. You wont find trims or heavy fabrics and no details or fussy kinds of things, says Dana Mount, manager of Stanton Designs in Tucker. Typically, the decor is conducive to its surroundings. For example, in the mountains, you may find rugged log cabins filled with earth tones, slip-covered pieces and folk art. Likewise at the beach, youre sure to find light colors, cotton fabrics and of course, relaxed ocean motifs. Vacation homes are also a chance to decorate or experiment with things that you just wouldnt do at your primary residence. Molly Bland-Watts of Molly Bland Interiors of Knoxville, Tennessee agrees. Most second home owners are thrilled with the concept of having a totally different character and ambience from his or her main house. Furthermore, it is a great place to be able to accumulate treasures from travels and have a place to show them off.
Planning for retirement
Finally, many people are buying second homes with the thought of eventually retiring there. Currently, interest rates are the lowest in history and people are finding that second homes are bargains they cant refuse. Still, many others are re-mortgaging their primary residence and financing the second home with their equity in hopes that when they retire, they can sell their primary home and pay off the retirement home. As a result, they end up mortgage free. Planning ahead now and taking advantage of interest rates can make a second home a vital aspect of any retirement plan.
What may start out as an investment, could turn into a lifetime of memories and enjoyable experiences for your entire family. In any event, if you cant afford to invest in a second home currently, at least consider renting one for a week to get a taste. Its perfect for that family summer vacationclose to home.