Upstate New York’s Vacation Homes Are Top-End
The lack of home inventory seems to be universal across the country as the COVID-19 pandemic has put pressure on homebuyers looking to take advantage of low-interest rates. For some, this meant buying their first home or upgrading to a new home to meet their family’s needs, and for those lucky few, it meant buying another home. Families' wants and needs have changed as a result of lockdowns, which sent many looking for a place to escape. Now, many want a safe space to be with their loved ones and make the most of an isolated summer or holiday.
This surge in vacation homebuyers has put a strain on Upstate New York’s vacation home market. Popular areas from Hudson Valley to the Northern Adirondacks have all experienced spikes in interest from out-of-town buyers.
New York State’s Vacation Home Market
New York State has always boasted a famous vacation home market, but with the onset of the pandemic, interest in renting and buying homes in Upstate New York exploded. Popular and expensive areas like the Hamptons have seen huge jumps in listings and sales prices. The median sales price jumped 31% to $1.3 million, 20% higher than in downtown Manhattan. A Hamptons home was recently rented out for the summer for the astonishing price of $2 million, though even millions of dollars won’t guarantee a Hampton property.
Harald Grant, an experienced Hamptons Broker, made an offer on his client’s behalf to rent an oceanfront home for the summer for $2 million — and it was rejected.
“I offered him $2 million and the owner said no,” Grant said. “Can you imagine? It’s a different world now.”
These luxury homes are being purchased for the purpose of living instead of renting, which has demand outpacing supply.
“I’ve never seen the Hamptons market like this — ever,” said Gary DePersia, another veteran Broker in the Hamptons. “As soon as a property comes up for rent or sale, it’s snatched up right away.”
Inventory can be especially tight in exclusive beach communities, making it harder to find the right home for households looking for an escape. As families transitioned to life in the Hamptons during lockdowns, a large majority decided to stay and say farewell to the hustle and bustle of NYC.
How to Cash in on the Vacation Home Market
Whether you’re interested in branching out into a new niche market or buying a vacation home for yourself, there are important decisions you should make before moving forward. Vacations require planning and logistics, and so will buying or selling a vacation home. Finding a property that will match you or your client’s lifestyle is crucial to the success of the transaction. But the most important decision to make is how the property will be used. From a financing and tax standpoint, it’s important to understand how the property will function. There are three options:
- Primary residence: The property is bought for as little as 3% down, and significant homeowner tax benefits are earned.
- Vacation home: The property is used as a vacation home. It can be used anytime, but bank lenders won’t allow the home to be rented out. The home can be purchased for as little as 20% down. Mortgage rates and tax benefits are the same as the primary residence.
- Investment property: The property can be rented out and available for use when it’s not rented. Lending rates are 0.25% - 0.37% higher than vacation home rates, and a down payment starts at around 30%. The tax benefits are less advantageous, but the extra income will help with affordability and maintenance.
Selling a second home that may double as an investment requires a different skill set than selling a typical family home - primarily an in-depth knowledge of the tax implications that second homes carry, as mentioned above. Additionally, clients looking to purchase a vacation home are more focused on the resale value, rental income, and taxes owed than they are on school zones and luxury kitchens. If you're going to specialize in this niche, consider pursuing NAR’s Resort and Second-Home Property Specialist Certification.
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