SECOND HOME BUYING IN RESORT AREAS – TRUCKEE, CA

Post Boom Second Home Buying Strategies

by Broderick Perkins

Buying a playhouse isn’t a game.

Economic market conditions shifted in vacation home buyers’ favor in some regions of the country last year, just as the traditional winter weather season took still more heat out of the second home and resort markets.

But that doesn’t mean vacation home buying is a breeze.

Just ask some late-to-market speculators who lost their shirts as the last boom faded. Other investors saw their cash flow become cash slow as speculators fled. Still others made buying mistakes that put their second shot at the American Dream, physically out of reach.

Buying a vacation home as an investment or rental property requires the same careful forethought necessary for any investment as well as professional assistance where warranted.

“Read up on the subject so you’ll know what to expect. Doing plenty of research and making an educated decision will keep your vacation home dream from turning into a nightmare,” says Christine Karpinski, director of Owner Community for HomeAway.com, an online vacation home rental marketplace.

“Buying a vacation home, especially one you’re going to rent out, means embarking on a whole new lifestyle,” said Karpinski, also author of “How to Rent Vacation Properties by Owner” (Kinney Pollack Press, $26).

For those taking the second plunge, here’s what to consider.

• Bubbles are full of air. One of the reasons some markets are favorable right now is largely due to fleeing speculators taking the air out of bubble markets where values were artificially inflated and the market oversupplied. Consider more established areas where the shorter supply lets properties hold value and applies a steady upward pressure on prices.
• Don’t leave your heart in San Francisco if your wallet can’t afford the pain.”It’s easy to get caught up and sign on the dotted line when you see that gorgeous beach home or perfect ski resort. This is especially difficult for vacation homebuyers because we’re risk-takers who tend to use our emotions more than our heads,” said Karpinski.
• Buy where you can host renters. Even if you have no intention of renting your property right now, you may have to later. That means buy in an area where you can rent your property should the need arise. If you don’t and you hit an income bump in the road, selling may be your only options. A growing number of vacation property investors are finding community pressure against short term rentals. Bans on short term rentals could turn a planned investment into a white elephant if rental income was figured in the return.
• Consider renting by owner rather than using a property management company. HomeAway, Inc. surveys report the average weekly rate collected by vacation property owners is $1,656 and that rent is collected 20 or more weeks each year. That’s enough to generate more than $750 in positive monthly cash flow on a mortgage that costs $2,000 a month. The cash flow doesn’t include reoccurring costs, beyond the mortgage, including the cost of property management which can put a real bite on cash flow. The income also doesn’t take into account the tax benefits associated with second home ownership.”The Internet has made renting by owner much easier,” says Karpinski.
• Consider property near enough to easily and quickly get to for your own vacation needs and for maintenance, upkeep and other reasons you may need to visit. Otherwise travel to you dream home could eat into your profit.
• Consider renting your property for 17 weeks and your new vacation home will pay for itself (including mortgage and other costs) if your monthly mortgage payment is less than or equal to one peak week rental, says Karpinski. The remaining 35 weeks are gravy or lots of getaway time.
• Buy down time. Take some of the gravy as your own. Buy property that will pay for itself and then some so you have the option of enjoying a getaway playhouse in a world where woe is the norm rather than the exception.

RECESSION PROOF HOME BUYING

Recession Proof Home Buying In Truckee, California – Bonnie Jessee, Dickson Realty

Good homes sell even in a bad market — and here are a dozen principles the experts watch for when evaluating a potential sale.

By Marilyn Lewis

The real-estate bust has stripped all the smoke and mirrors from the housing market. In the starkest way possible, it is revealing which homes hold value in a recession, and why.

“Even in this market, there are certain things that will sell,” says real-estate agent Michelle Sandoval in Port Townsend, Wash., where it’s difficult to sell homes, although prices haven’t dropped.

“Even in this market, I’ve had things sell for over full price. There are always bulletproof properties” that hold value better, Sandoval adds.

Certain upgrades can help recession-proof your house, but your home’s price resilience mostly depends on choices you made when you purchased. Since most homeowners buy and sell several times in their lives, you’re likely to have a chance to use these bulletproof principles the next time you buy.

Location, location, location

You’ve heard it before because it’s true: Location matters. It matters most, in fact, when it comes to holding value under pressure. Why? Because houses are replaceable, but land is not. If you’ve got a spot everyone wants, your place will sell faster and for a better price than a similar house elsewhere.

Take Punta Gorda, Fla., where, at this very moment, house prices are sliding so fast you can almost hear them sink.

“Everything is depreciating,” says Cady Rowe, an agent with Coldwell Banker Morris Realty in Punta Gorda. However, Rowe adds, how deeply your price depreciates depends on where “your dirt” is.

“If your dirt is sitting in Punta Gorda Isles on the waterfront, it’s going to be worth a lot more than dirt somewhere else with a thousand lots just like it,” Rowe points out.

A December study by Moody’s Economy.com predicted price declines in Punta Gorda will be the worst in the nation — down 35.3% by the second quarter of 2009. And that’s not accounting for inflation.

SIGNS IT IS TIME TO BUY YOUR NEW HOME!

HOW TO KNOW WHEN TO BUY YOUR NEW HOME

 Six Signs It’s Time For Home Buyers To Buy

by Blanche Evans

If you’re waiting for signs of a housing bottom, join the club. Nobody blows a whistle and say, “It’s time to buy!”

That’s why market timing is an art, not a science, but you can improve your odds of buying wisely.

First, stop paying attention to the national media. Fear has sidelined buyers even in good markets, and that’s exactly when you need to take advantage — before other buyers wise up.

Second, be ready to pounce when you see the home you want.

The time is right to buy when you see these signs in your marketplace:

• Inventories start to decline. That means that the best buys are leaving the market, and best doesn’t necessarily mean cheap. It means the homes with the highest likelihood of profitable resale. Desirable homes will leave the market first.
• Days on market reduce. Days on market refers to the period when a Realtor enters a home in the MLS for marketing to other brokers, until the home sells. When DOMs are shorter, that signals a coming seller’s market. A seller’s market has more buyers than homes, so prices go up and selection goes down.
• Mortgage applications increase. Interest rates recently turned back the clock, causing many homeowners to jump in and refinance. Purchase applications were also up. Either way, that means homes are about to leave the market, so less inventory means firmer prices. Sellers will stop dropping their prices.
• Sold homes go for closer to listing price. In 2007, home prices dipped for the first time in four decades. With a 1.9 percent decline, homes still sold within 97 percent of listing price. When they get to 98 percent, you’d better be ready.
• Prices remain firm or rise. Prices are a product of demand. To attract buyers, sellers reduce their prices and offer more incentives. If homes are selling reasonably well, prices won’t move downward — they’ll go up.
• Incentives disappear. When a market begins to favor sellers, they don’t have to do as much to sell homes. Watch new homes and see if builders are still giving away swimming pools and granite kitchens. If they aren’t, times have changed.

Any change in condition will change others, so again — be ready. Now’s the time to buy a better house while prices are low, interest rates are low and inventory is still high.

Published: January 22, 2008