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Buying a Second Home / Vacation Home in Phoenix

Most people, mainly baby-boomers, have become flush with cash and equity while their responsibilities and obligations have lessened.  The idea of owning a second home, whether for vacation purposes or investment purposes is alluring and attractive.  Many people purchase this type of home as a winter escape during the harsh winters back east for the mild and sunny climate in the Phoenix area.  Others are on the look out for a solid investment that is sure to bring steady returns on any level of investment. 

As you contemplate the purchase of a second home, especially in the Phoenix metropolitan area, you need to weigh and consider several options before committing yourself to a second home. 

The following are questions that you should ask yourself before buying a second home:

1. Is Phoenix the right location for me?  For decades, Phoenix has been a mecca for northern "Snowbirds" that seek refuge from the cold climates in the North and Northeast.  While the temperature in January is usually in the mid-60's, the summers can be downright brutal (with temperatures exceeding 110 °F.  Phoenix does offer a diverse offering of cultural, entertaining, and sport activities but these activities can be limited in some cases.

2. Is a second home / vacation home the right investment for me?  While the average appreciation on a home ranges from 5% to 10% on average (and higher in many cases), many buyers will have to leverage the purchase of these properties with a mortgage or draw out equity from another investment.  While this debt may be offset by having part-time renters to pay a portion of these payments, you are now forced to become a landlord and handle all of the liabilities that are associated with being a landlord (leaky faucet repair, remodeling costs, collecting rent, etc.). 

3. What neighborhood do I want to buy in?  For many second home buyers, being located near golf courses, entertainment venues, or 55+ communities is attractive.  Every area has its pros and cons.  Carefully weigh these options with your real estate agent to make sure that you have considered all of your options but are confident in your decision.

4. How much can I afford?  In the situations where you must finance all or part of the purchase, knowing how much you can afford to finance is crucial to the buying decision.  Also consider what type of financing is being offered, under what terms and conditions, and how that monthly payment will affect you on a monthly basis.

5. Should I consider the alternatives to a vacation home?  Maybe owning a second home is too much responsibility and upkeep, especially if you only plan on using it for weeks out of the there.  Alternatives include purchasing a timeshare or staying at extended stay hotels while visiting Phoenix.  Though you do not have the benefits of home ownership, these alternatives may provide greater flexibility to live in different parts of the Phoenix area...and who knows, after a few years of renting space, you may settle on one area to buy that vacation home.