News: Baby Boomers Eye Vacation Property Investments

A new trend in buying vacation property reportedly is letting people invest in their future as well as having a little piece for themselves when they want to get away from it all. And the baby boom

A new trend in buying vacation property reportedly is letting people invest in their future as well as having a little piece for themselves when they want to get away from it all.

And the baby boomers, it seems, are gobbling up this market.

Gary McCormick, senior account executive of Ackermann Public Relations in Gatlinburg, Tenn., said that the reason for the growing number of baby boomers buying vacation homes is just "simple economics."

"The kids are out of school and the home, and with the age of retirement coming up, these baby boomers are downsizing to smaller places," he said.

According to a National Association of Realtors study, the next six or seven years will show an increase in that age demographic investing in vacation property away from their principal properties.

There also have been changes in the tax laws that allow homeowners to sell their principal property, use the equity to downsize into a less expensive main residence and invest in vacation property, McCormick said.

"They no longer have a third of their capital gain wiped out by taxes," he said. "This also means that vacation homeowners can make that property into a permanent residence for two of the five years and then claim tax-free capital gains when selling it."

Along with the increase in vacation home ownership, on-site management companies have popped up all over areas near top vacation destinations. These management companies will manage the property and find vacationers to rent it.

"Sometimes vacation property is used as just that," McCormick said. "But when it's used as an investment, we are seeing that the property is being turned over to these management companies to take care of it."

Even some developers of resort areas are offering on-site management, he said.

Steve Replogle is the general manager of GolfView Resort in Pigeon Forge, Tenn., across the street from Dollywood. He said that the way a developer looks at this concept is to marry together the condominium rental with hotel-type service.

"I have been in the hotel business for a long time, and it's just recently that I heard about this type of vacation property," he said.

The on-site management that GolfView will offer will be a three-year rental program to owners where the resort will get 40 percent of the rental income for taking care of the property and finding renters.

Replogle said that GolfView will operate much like a hotel in that it will provide such things as maid service and breakfast to the renters.

But he said that he expects some of the owners to live in their vacation home year-round.

This concept is much different from buying a timeshare, McCormick said, because it can be more flexible and less time-consuming.

"Even though there is partial ownership, most of the time, timeshares will not appreciate from the amount paid into them," McCormick said.

But just like timeshares, he said, management companies are not federally regulated so they should always be checked out first.

Leslie Kish from Cincinnati's Better Business Bureau said that she was unaware of these type of management companies or the increase of vacation home ownership. But she said Cincinnati might not be a major vacation destination.

McCormick said the best way to approach any investment is with caution.

"See how much the property will be rented out in a year," he said. "If they say that they will only be able to rent it 10 percent of the time, it might be better to look some place else."

McCormick said vacation homeownership is a great investment "if you do your homework" and choose the place, whether it be a beach or in the mountains, cautiously. He suggests calling the local tourist bureau, Federal Trade Commission or any local realtor get more information about a piece of property, a management company or the area.

"Timeshare used to be the only way to do it," he said. "But the bottom line is that owning vacation property can lead to not only to better vacations, but also an investment or retirement." ©

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