DEL.ICIO.USSecond homes
Sharing the getaway
For the AJC
Sunday, February 01, 2009
Now more than ever, a vacation home may be just the thing your family needs to get away from the stress of day-to-day life. But how do you make it affordable in today’s economy? Here are three families who found three different ways to make it happen.
Christopher Oquendo / AJC Special
Cloudland Station on Lookout Mountain , which Greg Dover describes as a ‘self-contained community off the beaten path,’ may offer fractional ownership. Buyers’ shares determine the number of weeks allotted them each year.
Blue Ridge Mountain Rental
Sarah and Eric Johnston get to their vacation home in Blowing Rock, N.C., at least a week in the summer, one in the fall and around the holidays. Renting it the other weeks pays for the mortgage and expenses.
Christopher Oquendo / AJC Special
The Revelles and Smiths set up a system whereby each couple contributes equally to a checking account out of which bills are paid.
Christopher Oquendo / AJC Special
Bill and Debbie Revelle (from left) and Mark and Becca Smith bought a two-bedroom cabin in Cherry Log. They’ve updated the kitchen, created a wraparound deck and screened in the porch (below). Photos by Christopher Oquendo Special
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Right mortgage, great rental income
Several years ago, Sarah and Eric Johnston had a little money to invest. They were living in Chapel Hill, N.C., and bought a vacation home in Blowing Rock, about two-and-a-half hours away.
In 2006, they sold that home and bought another one in the same area. Even now that they’ve moved to Suwanee, they continue to use the house, which is now a little over four hours away. The rest of the time the house is available for vacation rentals.
“I save a week in the fall for a girls’ trip,” said Sarah, a mortgage broker, “and the family goes up for a week in the summer. I have to book Christmas and New Year’s for us a year in advance or it would be gone. We really go any time we can, but the house rents out almost every week for the whole year.”
Sarah says the rental income covers all the house expenses including the mortgage, the fees for Blue Ridge Mountain Rental and their taxes and insurance, and gives them a small positive cash flow.
One of the reasons is that the purchase was made with a five-year interest-only mortgage.
The four-bedroom, 3½-bath house sleeps 11. Visitors to the area enjoy skiing and snowboarding in the winter, horseback riding, hiking and whitewater rafting in the summer and Blowing Rock’s spas, shops and restaurants throughout the year.
Johnston says if you’ve got the money for a down payment, this is a great time to buy.
“Even with the recession, this past year was our best rental year ever,” said Johnston. “People may not be going to Vail or Aspen, but they can come to Blowing Rock.”
At a glance
Things to think about if you plan to cover your mortgage with rental income:
» Will you rent the home yourself or use a rental company? The company the Johnstons use charges 20 percent plus another percentage if the rent is paid by credit card. If you’re renting your house yourself, how will you handle advertising and scheduling?
» How will you handle items like cleaning, maintenance, snow removal and garbage pickup? Will your rental company take care of these or are they your responsibility?
» What will you need to supply and replenish for your property? Think about furniture, linens, paper goods, equipment like cookware and dishes?
» How much will you have to pay for taxes and insurance? Mountain properties generally have lower rates than beach property.
» What is the rental market like? Will it be rented year-round or just seasonally?
» The Johnstons financed their purchase as a second home, not as an investment property. They have to claim the income on their taxes, but also deduct the expenses. Talk with a CPA if this is something you’d like to consider.
Two families buy home together
Becca and Mark Smith, and Mark’s sister Debbie and her husband, Bill Revelle, all love the mountains.
They decided to find a getaway they could purchase together that would be easy to get to from their homes in Dallas and Roswell. Last October, they closed on a story-and-a-half cabin with a view of the Cohutta Mountains.
“It was the view that sold us,” said Becca. “There are no trees to obstruct the view, so there’s a beautiful scene outside every window on the back side of the house.”
The house was a great deal because it needed some updating, and the two families have remodeled the kitchen, adding stainless steel appliances, oil-rubbed bronze finish lighting and fixtures and granite countertops. They screened in the back porch and extended the deck to wrap around the house — a two-bedroom, one-bath on an acre of property.
“Buying with Debbie and Mark meant we could each pay half, so that gave us the opportunity to pay cash,” said Becca. “We just have a handshake agreement. If one or the other couple decides they don’t want to be there anymore, we’ve agreed they can buy the other out for what’s invested in the house, not what it’s worth.”
The couples bought the house for $139,000 and have so far invested about $25,000 in improvements.
“Every little home for sale in this subdivision is listed in the $300,000s so we feel we got a great deal,” said Becca. “It’s a buyer’s market right now.”
At a glance
What to consider when you’re buying a home with friends or family:
» Are you in 100 percent agreement on everything? If not, how will you settle differences? If someone wants out, what will you do?
» Whose name will be on the deed?
» How will you handle the bills? The Smiths and Revelles have set up a separate checking account to which everybody contributes equally and from which all bills are paid.
» The Smiths and Revelles alternate weeks. How will you schedule use of the house?
Own part of a home
If you don’t want to put together a partnership with family or friends, another option is to buy into something called “fractional ownership.”
A developer builds a property and divides the year into a number of shares. Maybe you buy a quarter share and you get the use of the property for 13 weeks. Or you are deeded a 1/6 fee-simple ownership and have the use of the property for 60 days a year.
Cloudland Station on Lookout Mountain in northwest Georgia is considering offering fractional ownership in its community. As part of assessing market interest for fractional ownership options, John Tatum, the development’s co-founder, has discussed the concept with Greg Dover.
“As a family, we didn’t want to commit our time or resources to owning a second home,” says Greg, a CPA who works in physician practice management. “Our kids are involved in a lot of weekend activities, and the maintenance and upkeep of a place we couldn’t visit regularly was more than we wanted to take on.”
But the family, including Greg’s wife, Diane, and their two daughters, Emily and Anna, have visited Cloudland Station and enjoyed their time there.
“It’s fun to sit back and see the kids run and play and not have to worry about where they are every minute,” said Greg. “Cloudland Station is a self-contained community off the beaten path, but it’s only 15 to 20 minutes from Chattanooga, so there are lots of dining and entertainment options. “
Dover says while it doesn’t make sense for them to own a place outright, a fractional opportunity might make more sense.
“Spending just 60 days or eight weekends a year there is probably all we would be able to manage,” he said. “A partial ownership is less of a financial commitment and something we can consider for our family.”
At a glance
If you’re considering buying into a program like this, here are some things to think about.
» How will the year be divided? Does this change from year to year so everyone has a chance at the “peak” periods?
» How will expenses for cleaning and maintenance be covered?
» What restrictions are in place for the use of the property?
» Will you have full access to the amenities there?
» What happens if you want to sell your share?