Unlocking Your Second Home

Brian Maloney's Fort Lauderdale, Fla., second home offers peace of mind and money. He bought the two-bedroom condo in 2005 after living in New York City for close to 20 years and running his marketing agency, Maloney & Fox, for 10. "I really felt [another] 20 years would go fast," says Maloney, 43. "I needed to have an investment property to retire in, or at least to have it appreciate."

His search led him 1,300 miles south to a $650,000 high-rise condo with views of the Atlantic. "I didn't hesitate," Maloney says. And while he waits for the property to appreciate, the condo provides a getaway for him and his friends and relatives.

In 2005, both investment and vacation properties skyrocketed to historic levels in the U.S., according to the National Association of Realtors.

The trend, says NAR's Walter Molony, was fed mainly by speculative investors. These days, that's less the case. The latest NAR report shows a steep drop in second-home investment sales relative to pure getaway-property purchases, with prices dropping and the speculative buyer now largely out of the picture.

While year-over-year vacation-home sales grew 4.7% in 2006, investment-home sales plummeted nearly 29%.

The good news for investors is that there are now more choices and a growing population of desperate sellers. In fact, 10% of second-home purchases in 2006 were foreclosure or trustee sales, according to the NAR. On the flip side, buying a second home hasn't gotten easier. Experts urge buyers to be more patient, observant and prepared when it comes time to apply for a second-home loan.