No Reservations

by Christine Karpinski

You've been thinking about buying a vacation home for some time now, but the dismal condition of the real estate market has squelched your enthusiasm. It's true that home sales are the slowest in five years (according to one doom and gloom article from, and yes, mortgage rates are on the rise. Still vacation home shoppers should take a "glass half-full" approach to today's sluggish real estate market.

The fact that home sales are slow right now is actually a good thing for you because you can get your vacation home for a lower price. Rising mortgage rates needn't be a deal breaker, either. If you can find one you can live with, renting your vacation home will help you offset that cost. Besides, a vacation home is not a short-term investment, like a fixer-upper you're planning to renovate and flip. It's a purchase that's meant to pay long-term dividends of fun and great memories.

Because there is a buyer's market in real estate right now, there's less pressure on you to make a quick decision. You never want to rush into any purchase of this size and the slow market allows you to slow down, do your research, and refine your plan. The last thing you want is to end up in an area where you can't rent your property or where the market is overcrowded.

There are lots of properties to pick from. The subprime mortgage collapse has resulted in plenty of foreclosures and distressed sellers. There are a lot of lenders out there more than willing to rid themselves of the foreclosed homes that have fallen into their possession, not to mention homeowners desperate to rid themselves of inflated mortgage rates.

Keep an eye on the local papers or connect with a local real estate agent that will watch the market for you in the area you want to buy for possible opportunities. You might just see a deal too good to pass up.

Patience, as always, is a virtue. Because a vacation home purchase is a long-term investment, your focus shouldn't be on what the real estate market is doing right now. Your concern will be what the price of your home is down the line, years from now.

Yes, at first you may have to rent out your property for most of the year just to break even. And it probably won't be a cash cow, so don't set your expectations too high. But be patient. As your equity builds and rental fees increase over the years, you can rent it less often and still stay ahead financially. Know that your property will eventually become profitable.

Avoid areas with short-term rental bans. The best way to protect yourself from market fluctuation is to leave your options open to rent your property on a nightly or weekly basis when you are not using it. Some complexes, towns, or cities have areas where covenants or laws restrict renting on a short-term basis. So, do the proper research before you buy.

Your vacation property can pay for itself. If you rent out only seventeen weeks of the year, your new vacation home may pay for itself. Surveys conducted through HomeAway, Inc. reveal that the average weekly rate is $1,656 and that the average property is rented out twenty weeks or more per year.

Research the area. Where are you thinking of buying? Is it a new, emerging area? Or is it an older, more developed area? If you are looking to purchase in an area that's well developed, such as The Outer Banks of North Carolina, you have less to worry about in terms of getting your money back down the road.

Learn from the subprime mortgage disaster. Those low rates on adjustable-rate mortgages can be tempting, but everyone should take a valuable lesson away from the recent subprime collapse. The last thing any homeowner wants is a ballooning mortgage rate that they can't afford. So, even if that cheaper one-year ARM is perfect for you, be realistic. If it happened to the poor soul who lost the vacation home you're thinking of buying for a song, well, it could happen to you, too.

Christine Karpinski is the author of How to Rent Vacation Properties by Owner 2nd Edition: The Complete Guide to Buy, Manage, Furnish, Rent, Maintain and Advertise Your Vacation Rental Investment and Profit from Your Vacation Home Dream: The Complete Guide to a Savvy Financial and Emotional Investment. Her books, combined with her seminars, media appearances, and Web site (, have helped thousands of people purchase and manage their vacation homes. Today she serves as director of Owner Community for HomeAway, Inc. (

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