According to the National Association of Realtors' (NAR) annual Investment and Vacation Home Buyers Survey, the median price of a vacation home fell last year by 11 percent (compared to the 5 percent decrease in median price of a typical primary residence). Many Chicagoans are taking advantage of this opportunity in the vacation home market to snag their dream home-away-from-home for a surprisingly low price.
For some Chicagoans, the purchase of a vacation home will prove to be a smart long-term investment, especially if they eventually decide to relocate to the vacation home after retirement and reside in it permanently. According to a NAR survey, some 34 percent of people who bought a vacation home last year plan on eventually relocating to it and making it a permanent residence. For many people wary of the wavering stock market, real estate can be a more stable long-term investment, and one that may pay off in the future.
Many vacation-homeowners who spend a large portion of the year away from their second homes are able to subsidize the cost of their mortgages by renting out their properties for extended periods of time. While this option requires that the owner of the vacation home be comfortable with the thought of strangers sleeping in their beds, those who chose to rent out their second homes are often able to benefit heavily. HomeAway, an online marketplace for vacation rental homes, claims that 48 percent of vacation-homeowners are able to cover up to 75 percent of their mortgage by renting to travelers, making the advantages of renting out vacation homes abundantly clear.
Still, even considering the low prices and all the benefits afforded by investing in a vacation home, Chicago homeowners should still consider the costs associated with a second home before making the decision to purchase. Financial and tax implications and monthly maintenance costs need to be considered before a commitment is made. Anyone considering buying a vacation home should also make sure they are fully capable of paying for the property, even in the event of a financial reversal such as a job loss. Many vacation home buyers put away enough money to pay for their second property for a year and a half at least so they do not end up in a bind if their finances change.
Before purchasing a second home consider when and how often you plan on staying in it. How will you maintain it when you are not there? How far away is the property? These are all questions that need to be addressed before making any serious commitments.