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Taking the stress out of a second home

Buying and maintaining a vacation home is no picnic. In fact, it poses unique challenges. But these tips can make the task a lot easier.
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Buying a vacation home often includes added expenses that might surprise even those who have bought first homes. With rising concerns surrounding natural disasters in remote vacation areas, insurance can be a killer.David Mcnew / Getty Images file
/ Source: BusinessWeek Online

Since real estate has become a consuming national passion, owning a vacation home might be some folks' idea of the new American dream. And plenty of brochures and glossy ads are around to tempt you into buying that long-desired cabin, cottage, or condo.

But potential buyers should be careful. Second homes in resort and rustic areas aren't like first homes. They often lack conveniences and access to the services that might help one address those inconveniences. Depending on their location, they may be subject to unfriendly occurrences like hurricanes and forest fires.

What's more, second-home buyers can be schizophrenic about how they plan to use the property: Purely for personal use? Rent it out part-time? And there are different approaches to take when considering a vacation home vs. a real estate investment.

Sound daunting? It needn't be. We'll try to help straighten things out in this Five for the Money, featuring tips for aspiring second-home buyers.

1. Know What You Want and Why
There are three main reasons why people buy vacation homes: 1) as a place to spend time; 2) as an investment; and 3) as a place to retire. Smart buyers should know what they want before they begin their search. David Hehman, CEO of, an Internet second-home marketplace, says people looking for an investment make up the biggest portion of second-home buyers now, and they should watch the market closely. Demand is high, he says, but so are prices.

Buyers looking to rent out the homes might want to consider less expensive areas, where rents tend to be higher as a percentage of purchase price than in ultra-expensive regions like New York's Hamptons. Of course, it shouldn't be in such an undesirable location that it will be difficult to find tenants. Vacation home buyers will be nagged by a different set of questions, too, like "Are we really going to make it out here every weekend?"

2. Watch Out for Extra Costs
Buying a vacation home often includes added expenses that might surprise even those who have bought first homes. With rising concerns surrounding natural disasters in remote vacation areas, insurance can be a killer. "If you're on a flood plain, obviously that's an issue," says Walter Molony, a spokesman for the National Association of Realtors. "And in the mountains there can be fire concerns."

One approach to mitigating costs is not to buy in the most exposed or remote areas. "You get dinged on that in a big way" if you're not near a fire station, Hehman says. In addition, he says, buyers should be prepared to spend between 1% and 2% of the purchase price annually on maintenance.

3. Get to Know Your Infrastructure
This sounds self-evident, but Molony says it goes far beyond exploring the antique shops and ski trails in the area. For example, houses in many vacation spots run on septic systems — do you know the implications of that? If the water comes from a well is it safe for drinking? Where's the nearest fire hydrant?

"A home in a rural area or a resort area isn't going to have the same kinds of services" as a metropolitan area, Molony says. The best way to ensure that you're going along the right track is to make any purchasing contract contingent on a house inspection and find a local broker with strong references to show you the ropes.

4. Look Before You Buy
Tim Richards, a past president of the Ocean City Board of Realtors and also the New Jersey Association of Realtors, says visitors to a spot can "become immediately enamored with it" and opt to move in before they have any sense of whether someplace would be a good place for them to spend much more time.

Visitors should contemplate the goods and services on offer as well as health facilities if they plan to retire there. "People don't think about that when they go on vacation," Richards says. He adds that on average second home buyers have "test-driven" the market for more than four years before choosing to buy a house there, an amount of time he says is about right.

5. Take Care When Picking Caretakers
Two real estate professionals from Florida recommend making sure you secure good people to oversee the property when you're not there. This goes double in a storm-ridden state like Florida. Lynda Traverso, a broker with the VIP Realty Group on Sanibel Island (Fla.) says it's essential to meet the people managing your home, since they'll most likely know the best plumbers and electricians in the area and will be in change in the event of a storm.

The wonderfully named Guy Trusty, president of Lodging & Hospitality Realty in Coral Gables, adds that since second-home buyers are often not present, they should think of it "like a business" and get good people to manage it accordingly. Choosing wisely may mean that your weekend getaway will remain in good shape for the times when you want to make your escape.