Given the rise of remote work over the last 18 months, it can be argued that vacation homes have never been more popular than they are right now. A recent report from the National Association of Realtors showed that vacation home sales were up by more than 16% last year and were up by an astonishing 57.2% in the first four months of this year.
If you own a second home or investment property, you may be wondering: is now a good time to sell it?
In the words of the Magic 8 Ball, all signs point to yes.
As we said, vacation homes are selling at a much higher rate than they have in previous years. The reasons for this increase are probably obvious: the ability for more people to work remotely. Those who no longer need to be in certain location for their job are now looking to move elsewhere, particularly locations that are far more exciting than what they’re used to.
That’s leading to more interest in vacation homes and second homes than there has been in many, many years and putting many of those who own a vacation home, second home, or investment home in position to perhaps make a solid return on their investment.
It’s important to note, however, that vacation home, second home, and investment home are not synonymous terms. There are differences between them. So, before we proceed, let’s discuss those differences.
What is a second home?
First things first, a second home isn’t necessarily the second home you buy. While that may be the case for you, to lenders and investors, a “second home” is the term they use to describe that is typically thought of as a “vacation home.” How you plan to live in the home will determine whether it’s considered a “second home” or not.
A property is considered a second home if the borrower lives in the home for some part of the year; if the home is occupied year-round; if the borrower is the only one who controls the property; and if the property is a one-unit home, meaning it’s a single-family home or condo. The property is also typically located at least 50 miles away from the borrower’s primary residence.
Beyond that, the property may not be used as a rental, subject to a timeshare agreement, or managed by a third party.
What is an investment home?
An investment home is just what it says it is, a home that is bought as an investment. An investment home is one that the purchaser does not live in themselves. Instead, these homes are used as sources of income, including renting it out on a short-term or long-term basis. Homes purchased to be rented out on short-term rental services like Airbnb will be considered an investment home. Investment homes are also homes that are being flipped for a profit.
A property will be considered an investment home if the purchaser does not reside in the property; if the property will be used to generate income through rent or lease; or if the home is being flipped for a profit.
Additionally, homes that are within 50 miles of the borrower’s primary residence are typically considered investment homes.
But if you already own a vacation home or investment home, you probably already know all of that. Now, let’s get back to whether you should consider selling your vacation home.
Is now a good time to sell a vacation home?
As we said earlier, yes, now is a good time to sell a vacation home. Obviously, there are many individual considerations like your particular situation; the home’s location, condition, etc.; and how the housing market where the home is located is performing. But overall, right now is likely a good time to sell as interest may as high as it’s ever been.
But today’s market isn’t normal one. Under typical circumstances, there are times that are better to sell than others. With that in mind, let’s take a look at when might be best time to sell.
When should you sell your investment property?
The best month to sell investment or vacation homes really depends on where the home is located. Typically, you’d want to list your home for sale when the particular location is popular. For example, if your home is a beach home or in a warmer climate, it’s probably best to list it when it’s warm. That will be when more people are in town to view the property and perhaps looking to buy a vacation home of their own.
Conversely, if your vacation home or investment home is in a colder climate, perhaps like a ski town, you should probably list in those snowy months for those same reasons.
It’s also important to consider the time that’s the best to sell in your particular area. Each market has a time of year when real estate is hottest. Nationally, the best time to sell a home is usually in May or June, but it’s not necessarily the same in every market.
You should also take the real estate listing cycle into account when thinking about listing your property. It will take some time (hopefully not too much) from when you contact a real estate agent to list your property to when it goes on the market. But you should also make sure the property is in good condition, clean, and ready to list when it’s time to list.
That should help you capitalize on those hot market times and get the highest price you can.
If you don’t currently own a vacation home or investment property, it may be worth considering if it makes financial sense for you and your family.
Do vacation homes make for a good investment?
While it depends on your unique situation, the answer is probably yes. There are a lot of things to consider when buying a house, let alone a second one. However, if you have the financial means to invest in a vacation home, now is a good time to do so.
It’s also important to think long-term on a vacation home or investment home purchase. Real estate is cyclical. So, the market for these homes may not be as hot in a few years as it is now. However, depending on your situation, you may not only be buying a vacation home for investment reasons. There’s also the whole “having a vacation home you can use” aspect of things as well. There are definite benefits of that, especially if you can work remotely yourself.
If you are interested in purchasing a vacation home or investment property, New American Funding can help. Our team of mortgage professionals may be able secure financing for your investment property and may access to a wider range of loan options than a big bank.
Contact our team today to discuss an investment property mortgage and today’s mortgage rates.