Can't Afford To Buy A Home? Maybe You Can Afford A Weekend One

If the idea of owning property sounds like an inaccessible pipe dream, the notion of buying something like a summer home before you even buy a real one might sound especially "out there." But it’s actually a move that some people in expensive, urban areas are considering.

Buying a home can be stressful and financially overwhelming, particularly for young Americans, and if on top of this you’re living in an expensive metropolis like New York City or Los Angeles, finding a place within city limits can feel completely out of reach.

According to a 2016 report from Zillow, urban homes nationwide are valued at roughly 25% more than suburban ones on a per-square-foot basis. So it's no surprise that for many first-time property buyers, a summer home might seem like a more accessible investment. But is buying a summer or weekend house before your day-to-day home actually a smart move?

We chatted with three real estate experts to get some insight on this question. We discussed some of the pros and cons of buying versus renting a summer home, when purchasing a summer home first can be a smart move, and what first-timers should keep in mind before hunting for their first home — vacation or otherwise.

"I don’t think there’s a one-size-fits-all piece of advice for buying weekend houses. Some people want to save money on rent in places they often visit. Others may want to invest in real estate but can’t afford the options in the place they want to live full-time.

"Most people buy summer homes in places they’re already pretty familiar with. That said, if the property is meant to be an investment or income generator, it’s worth understanding the local short-term rental, long-term rental, and for-sale markets. Each of these can affect the financial outcome. This can require some legwork, because the potential purchasers don’t necessarily live in the area.

"More and more, we’re seeing people separate the decisions of how to invest in housing versus where to live. Thinking broadly about different real estate investment opportunities can help people find the right option for them. At the end of the day, though, there’s always a significant risk whenever there’s the potential for a solid return. There’s no free lunch in real estate.

"The good news is that even if it turns out to be a bad investment, you can still spend great quality time vacationing in your summer home. You don’t get that option with an index fund or a bitcoin wallet.

"Be intentional about your goals in the purchase. Are you buying a home because you think it will make you money in the long run, or because you want to spend a lot of time making memories there? The answer could lead you to different decisions."

"Considering we are in the first buyer’s market in NYC in almost a decade and interest rates are expected to rise, I would highly encourage millennials (including myself) to buy a primary home first and rent a summer home.

"There are amazing mortgage products for up-and-coming areas that lend well below the current low rates, and most of the buyers I am working with are pleasantly surprised to learn what they can purchase in this market. Buying is often the same monthly payment as renting, and you are not throwing thousands of dollars away every month.

"For summer homes, I would suggest renting for the first couple of years. There is a lot to factor in with owning outside of urban areas, such as property taxes and needing a car year-round so that you can handle maintenance during the winter months.

"The idea of a cute cabin sounds great, but there is a lot of upkeep that will need to happen. You need to be able to have a flexible year-round schedule to take care of this investment beyond summer Fridays.”

"The first consideration is that with the average FICO score required for a mortgage at around 750 and down payments often starting around $30,000, many millennials will struggle to secure a mortgage, because we don't fit into the typical underwriting box.

"Many millennials have various income streams, higher student debt than prior generations, and less money in savings. And while a less expensive home (a $30,000 down payment may seem tiny to some) may be appealing, before investing, potential buyers have to consider all-in costs.

"It's not just the down payment and monthly mortgage payments — there are maintenance expenses, taxes, and insurance. Then there's the consideration of how much the home is appreciating over time and whether that return offsets the costs. If the summer home isn't something you'll be inhabiting full-time, there's also a consideration of management of the property and the task of being a landlord.

"While many people think buying a home is a straight math equation, there are actually a lot of other muscles and habits that need to be built in order to jump into home ownership responsibly. Figuring out what water system your home has, how the heat works, when your roof was last replaced, and what sort of quarterly or annual maintenance goes into a building just isn't something we have to think about as renters.

"If you can practice all of that — while also establishing solid financial habits of saving for the inevitable broken appliance or other unplanned expense — you're likely ready to buy."