The National Association of Realtors (NAR) 2011 Investment and Vacation Home Buyers Survey indicates that the typical vacation-home buyer in 2010 was 49 years old, had a median household income of $99,500 and bought a property that was a median distance of 375 miles from his or her primary residence. Those who purchased the property for investment purposes (rather than as a family retreat) had a median age of 45, earned $87,600 and purchased a home that was a median distance of 19 miles from their primary residences. Regardless of age or income, people purchase vacation properties for a variety of personal and financial reasons.

Vacation Property or Family Retreat
Many vacation property buyers are interested in having the home primarily for vacations and family retreats. The NAR survey indicated that "Vacation home buyers want the property for their own personal use, with 84%(of survey respondents) saying the primary reason for buying was to use for vacations or as a family retreat."

A vacation home can be particularly appealing to people who tend to visit the same location year after year. Owning a vacation property - rather than renting - can provide many perks including:

  • The ability to customize the property based on the owner's preferences
  • The convenience of having personal items in place, such as linens, toys and bicycles
  • The comfort of knowing what to expect when on vacation
  • The flexibility of using the property at any time
Principal Residence in the Future
The purchase of a vacation home is often made with the expectation that it will become a primary residence in the future. People who frequently vacation in one area may dream of living there during retirement. The NAR survey showed that 34%of vacation home buyers said they plan to use the property as a primary residence in the future.

While it is impossible to predict future home values, some buyers may wish to purchase a vacation home now to lock in a retirement home for later at current prices. In addition to looking forward to using the property as a primary residence in the future, it can provide years of vacation enjoyment.

For a Family Member, Friend or Relative
It is not uncommon for individuals to purchase second homes for children, aging parents, relatives and friends. According to the NAR survey 14%of vacation home buyers purchased the property for a family member, friend or relative to use. Some of the buyers purchase a home for their child or children to live in while attending college. This provides the kids with a comfortable place to spend their college years, and a place for family and friends to stay when visiting. When the children graduate, the property turns into a full-time vacation home.

To Rent to Others
The primary purpose for some vacation property buyers is to rent the property to others in order to generate income or offset the costs of the purchase. The vacation property could be on a year-round rental program or rented out only during prime vacation periods, such as summers (for beachfront properties), winters (for ski towns) and the winter holiday season. The tax implications of using a second home as a rental property are complicated, and we will be briefly discussing them in the "Renting out a Vacation Home" section of this tutorial.

To Diversify Investments
Other vacation home buyers may be interested in using the property as an investment. The buyer may have money saved and be looking for diversification. While there was a time when real estate was considered a relatively low-risk investment (based on the fact that properties had generally appreciated over time), modern real estate markets make no guarantees regarding the future values of properties. Buyers should thoroughly research market and sales trends prior to making a decision to purchase the property as an investment. One should never assume that the investment is a "sure thing."

Next: Vacation Property Walkthrough: Considerations When Choosing A Vacation Property »


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