When is the Right Time to Invest in a Vacation Home?

vacation_home_tamarindo_costa_ricaVacation homes can be great investments, but only if they are approached from a strategic point of view. The right time to purchase a second home will depend on certain considerations related to fundamentals, personal finances and the housing market.

Timing the market is not the right way to approach a second home; it is more important to determine whether a vacation home is a good investment at the time the buyer can afford them. With this in mind, there is an undeniable cyclical and seasonal aspect that influences the vacation housing market.

Prior to consider buying a second home, potential investors should first think about their own financial situation. As with any other investment, the funds to be utilize should not come from emergency savings or reserves; they should be free and clear of any obligation.

Once financial strength has been asserted, prospective buyers of vacation real estate should consider market conditions and activity. For example, the National Association of Realtors (NAR) reported an increase of more than 50 percent in vacation home sales from 2013 to 2014; this is indicative of a market on the rise, which further means that bargains will not be so easy to come by.

The End of a Vacation Cycle

Depending on the location, prospective buyers can observe the conditions of a vacation market to gauge the motivation of sellers. For example, there is typically a high demand for vacation homes along the eastern coast–you can check some out at Spinnaker’s Reach Realty.

A resort region besieged by unemployment and stormy weather, however, is bound to experience a drop in visitors. A historical example in this regard was Cape May and its barrier islands, which in 2012 were spared from the most catastrophic damage caused by Hurricane Sandy in New Jersey.

Despite escaping major damage, owners of second homes in Cape May had been largely unable to find vacation renters due to the ongoing Great Recession. By the end of the summer following Hurricane Sandy, vacation house hunters found frustrated sellers who had sharply reduced their asking prices in an effort to sell quickly.

The Cape May downturn would only last another season, which means that post-Sandy buyers made timely vacation home purchases; nonetheless, this is not akin to timing the market since there was no way for these buyers to guess a strong recovery would be forthcoming. They just knew why they were able to find a great deal.

In the end, the best time to find low prices and motivated sellers of vacation homes would be at the end of an unimpressive visitor season, which is when homeowners tend to reconsider their investments and think about enacting their exit strategy.

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