Vacation town markets here in the Midwest and around the country were red hot in 2020, with a surge of interest from second home buyers. And as more people head for retirement, adjust to full-time remote work, and rethink what they want out of their homes in a post-pandemic environment, the popularity of second homes seems poised to be a lasting factor influencing the market for years to come.
So, what should you keep in mind if you’re weighing the possibility of investing in a second home? It’s all about considering your goals, knowing how to navigate the market, and surrounding yourself with a team that can make your real estate journey easier.
Why Second Homes Are a Big Deal
During the summer of 2020, home sales in vacation communities were up notably from the same period in 2019 — with sales in traditional second home communities actually outpacing the national average, as Gay Cororaton, director of housing and commercial research at the National Association of RealtorsⓇ, recently explained to Bankrate.
A big part of the reason why? Spending more time at home as a result of Shelter-In-Place orders led to many people seeing their needs and goals in a whole new light, with many people citing more indoor and outdoor space as must-haves moving forward. The pandemic has also caused people to reflect on the things that matter most, including getting the opportunity to spend more time with family and enjoying the benefits of working from home — including not having to commute to an office every day.
Whether it’s on a lake, in the mountains, or on a far-flung beach, people generally invest in second homes to enjoy more space, carve out time with family, and take the opportunity to enjoy recreational opportunities you just can’t find in the city or the suburbs, from hiking to water skiing and everything in between. And getting away, even for a few days at a time, can make a big difference; a large and growing body of research has shown that traveling can promote relaxation, enhance creativity, boost your resiliency, and boost your happiness and personal satisfaction.
Debating whether or not a second home is right for you? Not sure how to start your search? Here are a few important things to keep in mind:
Finding the Right Location for Your Goals
Real estate is more than just the home you live in. It’s the life you get out of it. Deciding where to purchase a second home, and the property type that’s right for you, is a highly personal decision. There’s a lot to talk over with your friends and family, as well as a knowledgeable and experienced local real estate expert who will take the time to understand what you’re looking for and help you focus your search.
How often do you plan to be traveling, and how far do you want to go? For instance, research cited by REALTORⓇ Magazine suggests that many second home buyers, particularly those with younger children, are looking for properties that are less than four hours from their primary residence by car.
Do you envision this is a meet-up for family? If so, it’s important to find a spot that will be convenient for everyone you want to bring together.
What types of properties are you open to — for instance, do you need a detached house with boat access, or would you be happier in a condo with easy access to a pool? Do you want to be out in the woods, or in a resort town with shopping, restaurants, and things to do? When you picture your dream getaway, is it somewhere woodsy? Beachy? Snowy? Out in the open desert? Will you be using this property mainly in summer, mainly in winter, or all year round?
Similarly, if you’re looking to decamp to your second home for months at a time, don’t forget to factor in features that you might need, including high-speed internet access, a home office, and spaces for the kids to do schoolwork.
Considering the Costs
As with any real estate purchase, it’s important to carefully weigh the many financial elements involved in buying a second home. A real estate agent can help you get financially prepared, set a budget, and plan for ways to make the most of your new investment even after closing.
For instance, while vacation towns and second home communities are generally less expensive on the whole, limited inventory levels and a high degree of competition have led to rising prices in many of these markets. It’s important to plan ahead for your downpayment and mortgage costs, while also factoring in expenses such as homeowners’ insurance costs, taxes, and HOA fees.
Are you ready to pay for utilities for a second property? What about maintenance, upkeep, and landscaping — particularly for a home that may be in an area that gets hot, humid, or snowy? You may need to invest in a caretaker or cleaning service to watch over and maintain the property when you’re not around. And even if you buy the property furnished, you might want to make renovations or change out the decor to better match your tastes over time.
Using a Property for Short-Term Rentals
Could a second home become a source of passive income? Many people purchase second homes with the goal of using their new property for short-term rentals. There are a lot of important considerations that go into this decision, from understanding local laws and ordinances about property rentals, to getting familiar with the online platforms and services that can help you list and market your home for rentals — as well as the costs and fees associated with those platforms.
If you’re considering leveraging a second home as an investment property, it’s important to do research and work with a team that can help you understand all of the ins and outs. Resources such as AirDNA can provide useful insights for evaluating the income potential of a vacation property or a local marketplace; your real estate broker can also help connect you with real-time data, important informational resources, and helpful service providers in your target area.
Setting Yourself Up for Success
As with any major real estate purchase, it’s important to surround yourself with the right professionals at every step of the way.
Real estate is more complicated and more competitive than ever. The real estate professional you choose can be the most important decision you make for your homebuying journey. Baird & Warner agents are trusted guides who know how to turn an intricate, complex process into one that is smarter and more seamless from beginning to end.
And with Baird & Warner, you can count on having access to mortgage and title services, all under one roof. Before you even begin looking at properties, your Baird & Warner agent will take care to make sure that you’re looking at the right properties for you. A loan originator from Key Mortgage Services can help you get an airtight approval, so you know exactly how much you can afford and are in a position to move quickly and stand out to sellers. And when you’ve found the right place, Baird & Warner Title Services can keep the process moving quickly, so you can make an offer with confidence and get to the closing table on time.
When Home Means More, You Need a Team With More to Offer
Dreaming of a private getaway that’s waiting for you? With low interest rates and the expertise of your local Baird & Warner agent, your dream of a second home is within reach. Our agents and our in-house lending partners at Key Mortgage know just how to work together, so that you can navigate our changing market and find the perfect second home for your next adventure.
And if you’re looking out of state, that’s no problem! We’re a local company with a global reach, and our One-Stop Shop team extends far beyond Chicagoland. Your Baird & Warner agent can connect you with great agents anywhere in the country, and Key Mortgage is licensed in states including Michigan, Indiana, Wisconsin, and Florida.
Home is about so much more than just four walls. Buying or selling a home is a big deal, and with everything we experienced in 2020, our homes have never been more important. That’s why your local Baird & Warner agent is with you at every step of the way, from finding the perfect home to connecting you with local experts in mortgage and title. Whether it’s the beginning of a story or the end of a chapter, we’re here to help.
