Buy Your Second Home First

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Craig Clausen, 38, was living with his parents in the New Jersey suburbs when he and a friend bought a vacation house together in upstate New York. “We wanted to have a place where we could host all of our friends. We got a four-season house within 15 minutes of a ski mountain, and every summer we have a huge, weekend-long party with live music and camping.”

Clausen, who has since moved out, became one of the growing number of second home owners still renting their primary residences. The idea is simple: Get into the housing market and start building equity before you’re ready to shell out $1,000,000 for two bedrooms in Manhattan or Los Angeles. Plus, there’s an undeniable advantage in owning a country home to use as an escape from city life, or even for a few weeks vacation. There’s no data on exactly how many are doing this, but real estate experts say it’s an increasingly popular option.

“It’s still really expensive to live in places like San Francisco, New York, L.A., Boston, and Chicago,” says Christine Karpinski, author of Profit from Your Vacation Home Dream, who speaks to as many as 1,000 people weekly about the ins and outs of home ownership. “A lot of people, especially those who don’t yet have kids, can’t afford to buy a place within the city limits. They don’t want to give up the lifestyle of living in a city but they do want to build equity and good credit for themselves and have a place to get away.”

The difference between primary and secondary home prices is often huge. Clausen’s place in Johnsburg, New York (about four hours from New York City), cost less than $100,000, but something comparable closer to Manhattan would be at least five times that. Even so, additional monthly expenses such as utilities and home or yard maintenance need to be weighed carefully. In order to recoup mortgage costs, many buyers use their second homes as rental properties when they’re out of town. In this way, the house could pay for itself over the long-term.

“I rent out my house in Buckeye, Arizona, to friends,” says Tom McCarthy, 28, who currently lives with a roommate in L.A. “It’s going to pay off when it has appreciated and I’m ready to buy a place in Los Angeles.”

Buying a secondary house first definitely involves a financial learning curve, since things like mortgage rates and home equity loans can be different for primary and secondary homes, not to mention all of the surprise expenses that go along with home ownership. “We had to xerox our whole life,” says Evan Gotlib, a corporate sales director for Time Inc. Media Group who rents in Manhattan and owns a weekend home in northwestern Connecticut. “It’s two sets of bills. Two toothbrushes, two things of toilet paper, two cable bills. It’s like having twins.”

Three Places to Look:

The Northeast Kingdom, Vermont: Beautiful and lush in summer. Even nicer in winter. And so much syrup!

The Santa Ynez Valley, California: Just north of SoCal, a different take on wine country. And so many horses!

The Olde English District, South Carolina: Greenville has come back to life. And so much great beer!


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