Recent figures from the National Association of Realtors show an upward trend in the number of second homes purchased for investment purposes, with rental properties outnumbering vacation homes by a wide margin. Property values do fluctuate, of course, but according to Tom Kelly, coauthor of
How a Second Home Can Be Your Best Investment (McGraw-Hill), sinking a portion of your net worth into residential real estate can be a great way to diversify your portfolio--even if the first home you buy bears no resemblance to your dream vacation getaway.
Kelly explains that for investors who currently lack the means to acquire an idyllic leisure-time retreat, the path to owning a vacation home can begin with a more affordable and utilitarian rental property close to home. "That becomes a real financial nest egg for you," he says, "and down the road you can build equity and trade it for a place you've always wanted to spend time."
When you do invest in a vacation home, Kelly believes it's wise to look for a place that has value as a part-time rental property as well. "Find something you like that you also can rent out, because most of the time you're not going to be able to use it as much as you think."
As with any investment, Kelly adds, due diligence is key. Before making an offer, set aside your rose-colored glasses for a moment and learn all you can about local zoning laws, construction standards development plans and other factors that may adversely affect the long-term investment value of the home you plan to purchase.
More questions to ask yourself:
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main page(Morris Dye is a California-based writer and travel journalist who's still saving for his dream vacation home on a beach in southern Thailand. His work has appeared in the San Francisco Chronicle, Islands Magazine, TIME Asia, Fineliving.com and other publications.)
