The Second Home Muse

Kauai Second Homes

Remember Puff the Magic Dragon, who lived by the sea? He still does, in the land called Hanalei. It's the north end of the Hawaiian Island of Kauai. Every night as the sun sinks over the dragon-ridge, into the blue sea, slack key guitarists play Puff's song, while locals and tourists revel in the balmy atmosphere.

With my editor heading off on a jaunt to Puff's magical land, I checked into second homes there, hoping she could find one for me. Although Kauai is one of the least developed of the islands, the real estate prices are over the top. With a median price of a single family home at $700,000 (up from $250k 5 years ago), and condos at $440,000 there's not much bargaining space. Even buying ag land is pricey.  If I grow papayas, and pay $200,000 for a parcel, I can build my house for about $400 per sq foot. Not sure that papayas will cover that. Perhaps the best option for Kauai are the timeshares and resort vacation ownership, in places like Princeville. Otherwise, you may have settle for short term visits. Is this why Puff finally 'ceased his fearless roar?'

Second Home Doldrums

I hope everyone had an enjoyable Memorial Day holiday. The interesting news, besides my being mentioned in Barron's Cover Story on Second Homes this weekend :), is the way Barron's article covered the second home market. They talked about the over-valuation of second homes, which is traditionally the way we talk about stocks. It means that the adjustment that seems to be happening is a natural consequence, and will make the second home market more stable, after the adjustments.

Meanwhile, the effect is that many homes are staying on the market longer, causing a bit of a glut, and people are cutting prices drastically.  Places like Naples, Florida are taking big hits. The demand for second homes under $1 million has dropped by 45%, the first downturn in Naples in 35 years. Not so obvious are other areas, like Sarah's home town of Litchfield, Connecticut, which had been luring Wall Street execs with its rolling hills. Their prices have rolled downhill by 10-14% for the under $600k homes.

What's a buyer to do? Wait it out. What's a seller to do? Get good marketing help...you are not in the drivers seat at the moment, and the more exposure you can get, the better. And remember, all's well that end's well, even this.

Earth Friendly Second Homes

A recent Washington Post article points out that two-thirds of the people buying second homes want them to be near water -- ocean, bay, lake, river, waterfall, etc. Since we come from water in the womb, and most of our body is water, it's no surprise that water makes us feel at home. However, as one water conservation group, Chesapeake Bay Foundation, points out, the impact of development near bodies of water can be significant.  William Baker, president of the foundation, offers some great advice for those of us buying second homes and wanting to protect the earth. Here's some of his list:

- Buy existing homes and do renovations without disturbing additional land
- Buy homes in developments that are hooked to public septic and sewage systems in existing towns
- Select places where trees and vegetation are a buffer between the water and the buildings;

I'd add one more... give Condo's a good look. Condo and high-rise buildings actually have less of an impact on the water and land, as they leave more undeveloped areas. Sprawl is the worst; avoid it at all costs. It's not too hard to be earth-friendly; it just takes the willingness to think about it.

Florida Second Home Taxes are Taxing

A month ago we wrote about the increases in second home taxes in Florida, and how it was driving people to think of other places for second homes. On March 22, the W.S. Journal reported more accurately on the subject, showing that what is in fact at issue, is not just how high the taxes can be raised, but that the disparity between second home taxes and primary home taxes is quite severe. They point out, for example, two identical size lots near each other. The second home owner pays $3,007 while the permanent resident pays  $271 on mobile homes of similar size and age. What's particularly interesting is that it doesn't actually take much to declare yourself a resident. There's no requirement to actually live in the state!

It leads me to wonder, is this double standard actually accomplishing anything at all? Who is really paying the price here? My guess is that in the long run, the state will suffer, as  people think twice about reitring to Florida. Meanwhile, there's a great case waiting from some lawyer to prove that the dual-standard system is not legal anyway. Any takers?

Financing a Second Home in Mexico

Buying property in Mexico often seems attractive, but then people get scared off because the 'system' isn't quite the same as the US. However, we are finding that it is easier and easier to finance a second home in Mexico, and get the same tax benefits as if the home were in the US. According to the folks at Finance North America, a company dedicated to financing properties in Mexico, there are really only two principles.

First, a foreigner may acquire rights over real estate in Mexican coastal and border zones through a trust, called Fideicomiso, which is a legal instrument similar to those in the US. And second, through this trust, real estate is administered by a qualified and licensed bank on behalf of the beneficiary of the trust (the property owner).

Since the sun still shines brightly across the border, the beaches still glimmer with white sand, and the food and people are so lovable, it is worth checking it out. Here's some hot Mexican properties, and here's more information about how to finance property in Mexico.

Orlando Vacation Homes

The realtors in Orlando have their hands full-- of properties to sell, with a record number 16,000 listed. According to an article in the  local paper, the problem is that sales are slowing down. However, there is a lot to be learned from just this one market about What to Buy and Where to Buy.

First, condos are still very strong, at least in Orlando. While  the sale of single-family homes dropped over 15% from 2005, condos increased by 32%.  So buying a vacation condo rather than a single-family home is definately worth considering.

Second, think about the local rental market where you are buying. In a slowing sales market, more second home owners may want to rent their property rather than sell it at a lower price. If the location is already saturated with hotels, (as is the case in Orlando) renting the condo may not be so easy. As part of your buying research, be aware of your competition from alternatives like hotels.  If you do your homework, you are bound to make the right choice about What to buy and Where to buy your second home. Then, it's all about When.

Ski Condo or Fractional?

We've long been proponents of home ownership, and for many, a condo is a great idea. Because of the shared maintenance, it is easy to have the convenience of a second home as well as rental income. However, recently, more properties in resort areas are creating good value through fractional ownership.  I was reading about one fractional offering at the ski resort of Hunter Mountain, New York, a place that has gone from a sleepy New York mountain town to first class ski resort. It occurs to me that in some ways, a fractional alleviates the problem of finding rental tenants for the times you are not there!

A fractional is NOT a timeshare. Here's how one fractional works, the Kaatskill Mountain Club. You buy a quarter share of the condo. You get it for 13 weeks a year, and those weeks rotate, so that it might be the first week of the month, then the second, third, etc, so that everyone has an equal chance for holiday weeks. You own it just like a condo, with tax benefits, legally deeded property and a homeowners association. But all the other hassles are removed. You don't have to search for renters. You don't have to do the housekeeping or maintenance from other people's mess. And, most of all, you don't to have to pay for 100% of the price.

Perhaps as prices rise, this kind of property sharing will make more and more sense to people. We'd love to hear your experiences.

Read more about Fractionals here.

Second Homes in British Columbia

Time to check in on our neighbors to the North, the Canadians. It was fun to read what is happening in the prime vacation spot of British Columbia, where many US  citizens often dream of retirement. According to the latest surveys, the people in the province of Alberta, Canada, are scoffing up British Columbia's waterfront cabins, ski chalets and resort condominiums in record numbers. They exceed buyers from two other provinces as well as buyers from nearby Washington state. And, they are definately second home owners. They maintain their residency in Alberta, coming to British Columbia for fabulous recreation.

This influx of out-of-state money is also driving the prices up in British Columbia, which is a shame, as it used to be one of the last great deals. If you've been thinking about BC, it would be good to act sooner rather than later. It is definately one of the more beautiful recreation areas in North America.

Read about  Vancouver.

Vacation Home Rental Tips

One of our favorite vacation home authors, Christine Karpinski, was featured in a Miami paper recently. We  always learn something new from Christine, who has made herself an expert on the way to own a vacation home and then finance it through renting it out. In the Miami article, we picked up two new tips.

First, she mentions that if you are buying a vacation home and plan to rent it, a three-bedroom home will attract more rental options than a five-bedroom house. That makes sense, as families outnumber groups when it comes to looking for vacation rentals.

The other neat point is that if you accept pets as part of the rental, your occupancy rate increases from 10 to 50 percent. In addition, it is also possible to charge more for the property rental. As a pet owner myself, I know that my exceptionally well-behaved dog would be easy to accomodate on vacation, and I would be happy to pay a premium. If the pet is obnoxious, most people wouldn't want to take it along anyway, so the risk is fairly minimal. Thanks for the tips, Christine. I hope more people realize the value of helping families keep their pets with them on vacation. Ours sure hates being left behind all the time.

For more about renting out your vacation property, visit our library of articles, which includes excerpts  from Christine's books.

Warm Housing Markets Still Hot

With the Monday NAR first quarter report in, we like to look for the winners. Although overall the housing market dipped 3% from last quarter, the year to year comparisons are still up over 1o%. It is interesting to see that big gains are still happening in the places we know are second home havens. These include Phoenix, the leader with an increase of 38.4 percent. Then, as usual, Florida leads, with Gainesville, Florida (31.9 percent), Ocala, (30.8 percent), and Deltona - Daytona Beach - Ormond Beach.(25.4 percent). Finally, there's Eugene, Oregon (up 25.3 percent).

Florida and Phoenix are also the leaders in the most-searched vacation home locations. But it's not clear  what is driving Eugene up. While  it is a great college town, it's not necessarily a focal point for vacation or retirement. Perhaps someone out there can give us a clue.