How to Survive a Recession

LESSON 30: Buy a Vacation Property

All interest paid on your first and second homes in the U.S. is tax-deductible. Other countries have similar tax incentives to promote home ownership. A second home is an opportunity to gain real estate investment exposure with little or no income penalty.

If you have enough cash to make a second set of mortgage payments, a recession is an ideal time to purchase a vacation home. Vacation properties are one of the first big-ticket items that financially distressed investors attempt to unload. As wealthy families face a cash crisis, a wave of desirable beachfront, island, golf course, and mountain homes come on the market. The local economies around these areas are highly dependent on tourism, which also drops significantly, making local buyers unable to absorb the new supply of high-priced homes. Prices fall quickly until buyers come back into the market looking for a good deal with long term investment potential.

As the economy comes out of recession, vacation homes become hot items again. Purchase prices and rental fees for vacation homes and timeshares increase rapidly, making these good speculative plays with many potential future exit strategies.