Making the second home real estate play is hot now, according to housing experts. The window of opportunity for buying a vacation home in Orange County, California, could be closing soon as interest rates go up. According to a recent article by CNBC, affluent buyers have been buying up second homes suspecting the low-interest rate environment won’t last forever. If you are a hard-working and fortunate boomer who profited from the recent stock market boom, your timing is flawless when it comes to snagging a second home now. To position yourself for an incredible retirement, consider luxury Orange County homes that would eventually become your primary residence. CNBC reports that the sales of second homes or vacation homes rose 57 percent in 2014 compared to the prior year. Second homes made up 21 percent of real estate transactions in 2014, which was the highest share since people started tracking it in 2003. The National Association of Realtors’ survey discovered 85 percent of people buying vacation properties are confident that now is a good time to buy real estate.
- Buying when you can afford it
Buying a second real estate property is more affordable when interest rates are low unless you make an all-cash purchase. Experts recommend only buying a vacation property out of your financial strength rather than weakness. In other words, if your business is failing or you just got laid off, it’s not the time to invest in a second home. On other hand, people who have a lot of equity in their primary residence have the backup plan of knowing they can turn their new Orange County second home into their primary home at any time.
- Getting financing together
If you aren’t going to make an all-cash purchase, it typically takes a 20 percent down payment to buy a second home. Lenders will check to make sure your debt (including any mortgage on your first home) is no more than 36 percent of pretax income each month. Some options for getting money together to buy a high-end second home in Orange County include tapping a Roth IRA, but touching only the money you put in rather than the earnings.
Another advantage of buying a second home in today’s economy is the fact that it protects investors who have too much money invested in stocks if the stock market endures a correction or crash. If you can’t afford to keep a second home for your personal use, there is always the option to rent it out.
At the Feldman Group Real Estate, we help our clients find primary residence as well as vacation homes in Newport Coast, Newport Beach, San Clemente, Mission Viejo, Laguna Beach and Nellie Gail Ranch. For more information on buying real estate to position yourself for the future, please contact us.