Thinking about spending the winter somewhere else? Join the crowd.
The higher the snow stacks, the lower the temperature goes, the more appealing it looks to own a second home in a nice climate. That’s why many well-off older homeowners have warm-weather getaways in places like Arizona and Florida.
Some of these lucky folks reside at address No. 2 several months a year, a real luxury. Others buy second homes and visit them only occasionally, believing they will eventually move there permanently and sell their primary residence.
No matter how you use a second home, buying one is a big decision. Here are a few ideas to contemplate while you dream by the fire.
Second homes win the popular vote. If you’re thinking about buying a second home, you have a lot of company. The U.S. Census Bureau estimates there are about 6 million second homes nationwide. About 6 percent of all homes sold last year were second homes and many were purchased as trial retirement homes.
Sales of second homes have risen 27.4 percent since 1995, according to the National Association of Realtors (NAR), Washington, D.C. In 1999, there were 377,000 single-family second home sales, up 9.3 percent from 345,000 sales in 1997.
The median age of second-home buyers is 52. NAR forecasts that the huge number of people now entering their 40s and 50s will add 100,000 to 150,000 starts for second homes each year for the next 10 years.
Taxes. The robust economy of the last 10 years gets much of the credit for the rise in second home sales, experts say. Equally important were 1997 tax-law changes.
Home sellers can now exclude up to $500,000 in capital gains from taxation. That essentially did away with the capital gains tax penalty for most buyers wishing to trade down to a smaller primary residence and also use some of the equity to purchase a second home.
In other words, changes in tax law have made the ownership of a second home a practical possibility for many people.
Trial Retirement. A second home can be a good way to test a retirement location. Most people nearing retirement age pick a second home spot they already know. Maybe they have vacationed there. Or possibly they already have relatives in the area.
Vacationing in a place is not the same as living there, experts warn. But buying a second home and residing there, at least part-time, gives you the chance to see if you like it. Two months, say, in Punta Gorda, Florida, may be the little push you need to make the final decision to retire there permanently.
However, if you buy a place and don’t like it, you will have a property on your hands that has to be sold.
Financing. Think about making your second home purchase while you are still employed, suggests Robert Irwin, a real estate expert and author.
“Use your credit standing and income to get a good financing package,” said Irwin, author of “Tips and Traps When Buying a Condo, Co-op or Townhouse” (McGraw Hill, 1999).
Another recommendation is to buy a place that’s really affordable, i.e. small. Pay cash or make a large down payment.
“A second home should not be a financial drain,” said Irwin. “If you have a big mortgage on a second home, every time that monthly payment comes around it can spoil the fun and adventure of a second home.”
Location. While it’s nice to imagine a beachfront condo for the winter, consider how often you can practically manage to get there.
Many Chicago-area residents approaching retirement age prefer to buy second homes in Michigan or Wisconsin.
Generally, if you are still working, experts advise that a second home should be located within a day’s drive of your primary home. Otherwise, you won’t use it enough for the cost to make any sense.
If you’re already retired and you can handle the travel expenses, a faraway place may be worthwhile.
For Rent. Don’t count on rental income from the second home to swing the deal.
Managing a property at a distance is always difficult. It can be hard to find renters. And vacationers, if those are your primary renters, are especially tough on furnishings, appliances, carpeting and even woodwork and walls. Cleaning up after renters may not be how you’d like to spend your time at your second home.
Time shares. Time shares are now being marketed as a way to avoid the high cost of hotels on vacation. Even so, a time share can allow you to try out a place without a huge financial commitment. Because time shares often can be traded, owners can also sample a number of different locations.
A nice two-bedroom time-share in a desirable location averages $12,000-$17,000 a week, according to the American Resort Development Association, Washington, D.C.
However, time shares are not easy to resell. Even the time-share trade group says no one should buy a time share as an investment.
Condominiums. A condominium often serves well as a second home. However, if your primary residence is a single-family home, you’ll quickly learn that a condo is not a just a small house.
Condominium owners give up a lot of the control they have over the property, but they also gain some advantages that appeal to second homeowners.
In particular, condo communities usually handle outdoor maintenance. Many condominium communities are gated, a nice security feature if you’re not there all the time. Also, condominium communities often have amenities, such as a swimming pool or recreation center — features you probably won’t get with a single-family house.
Resources
A new two-story addition with 60 assisted living units is under way at Rolling Hills Place, a nursing home in north suburban Zion. The new studio, one- and two-bedroom residences will be completed in April. Legat Architects of Chicago handled the design work. For more information, call 847-746-2147.
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Jane Adler is a Chicago-area freelance writer. If you have questions or information to share regarding housing for senior citizens, write to Senior Housing c/o Chicago Tribune Real Estate Section, 435 N. Michigan Ave., Chicago, Ill., 60611. Or e-mail adler@corecomm.net
