If you're thinking about buying a vacation home, you're not alone. The rate of second-home ownership has jumped, as large numbers of baby boomers move into their prime wage earning years. It is estimated that between 6 and 10 percent of homes in the United States are second homes. And in desirable vacation communities that number is much higher.

According to the U.S. Census Bureau, 32 percent of all homes on Cape Cod are seasonal, and prices are up more than 60 percent since 2000. Seasonal homes represent an even higher percentage in the Cape May - 48 percent - and prices are more than 70 percent higher since 2000, dwarfing the national average of all homes, which increased by about 32 percent.

The trend of second-home ownership shows no signs of slowing. People in their 40s, 50s, 60s and beyond are much more active than their parents were. They're seeking outlets for fun, and with two wage-earner homes having more disposable income than ever, the trend will continue.

So if you're considering a second home purchase just where do you start?

  • Location.
    Taking into account your personal tastes, interests, and hobbies, decide where you would consider a second home. For example, if you're the type of person who thinks anything over a two-hour ride is too long, then you'll have a fairly small geographic area in which to conduct your search. If you plan to use your second home for a couple of vacations every year, and long holiday weekends, then you likely can extend your search to a larger radius. Many second-home owners purchase properties in their favorite vacation areas, because they already enjoy the area and want to spend more time there.
  • How much are you willing to spend?
    Prices can vary greatly. Up and coming communities are less expensive than established vacation hotspots which have seen explosive appreciation. Prices in these popular areas can vary greatly - with a home on the beach worth $1 million, to the same-sized home a mile down the road worth half of that. Check current mortgage rates to get an idea of what your mortgage payment might be. Also, don't be afraid to jump in the car and spend some weekends looking for different vacation home options.
  • Get more specific on your location.
    Is your dream vacation home near a lake, or on the lake? Do you want to water ski on that lake, or do you want a quieter spot to kayak or fish? Or is the lake in the mountains so you can combine winter and summer sports? Is it in an area that is a plane ride away, but one in which you hope to retire to? This part of the process will likely take some time, but you can learn the price of second homes in the area you have decided upon without leaving your computer.
  • Think about what it should look like.
    Is your dream vacation home a rustic cottage near the ocean? Or is it a condominium on a golf course? Perhaps it's a ski chalet in the woods. You also need to determine how big it should be. Is it just for your immediate family, or would you like to invite your extended family and friends as well?
  • Find a great real estate agent.
    This step is absolutely critical. A terrific real estate agent can not only find you a great home, but find one in a town with moderate property taxes with fun neighborhoods for your children. Your agent can even help you with the finer points of owning a second home - everything from obtaining beach stickers to trash removal to finding someone to watch your second home when you can't be there. And if you're considering renting out your second home, the agent can help you determine the rental price
  • Take your time.
    It's tough to look for a second home, although the Internet is making it easier. A growing number of Web sites show both interior and exterior photos online, making it much easier for you to narrow your search - without driving back and forth over and over. But rushing into a second-home purchase can be a mistake. A trailer on the lake might look good today, but thinking about your long-term goals may lead you to a cottage down the street from a lake, just a mile from the ocean.
  • Look at second homes the same as you did for your primary home. The most costly home repair projects are
    • Kitchens
    • Bathrooms
    • Heating systems
    • Roofs

That doesn't mean that you shouldn't purchase a second home with an outdated kitchen. Just understand that if you can't tolerate the current kitchen that it can easily cost you $10,000 to $40,000 to update. But unlike your primary home, you'll have the additional challenge of managing a renovation project long distance and finding a quality contractor who you can trust.

Buy a Second Home that Will Suit Your Personality and Needs.

If you don't like working on your primary residence or dealing with contractors, you may want to look for a home that doesn't need much work. At the same time, buying the smallest second home in the best neighborhood you can afford can mean that your investment has more room for appreciation over the long term.

While rentals in the area you choose may be strong today, when budgeting for your purchase, you may want to ensure you can afford the mortgage without any rental income. There are many facets of second home ownership that are out of your direct control - everything from a gasoline shortage to a hurricane or other natural disaster.

Taking the time to choose wisely means that you may want to monitor what is happening in your desired vacation community. Learning how long homes have been on the market can give you an idea of how much room you will have in negotiation going forward, and learning the overall direction of housing values in your selected region can help you to make educated buying decisions.

Pros and Cons of a Second Home

Buying a second home is a big step and most likely your most valuable investment after your primary residence. You should never rush into a home purchase; you need to consider it over time. Determine how much use your vacation home will get and how it can fit into your finances.

Don't forget to double everything. Buying a vacation home means that you will not only have two mortgages, but also two property tax bills, water bills, fuel bills, etc. Two homes also mean more maintenance, including two plumbing and heating systems, septic systems, and roofs. And if something breaks down in your second home, chances are you may not be there to see it. For some, this is too stressful to contemplate.

At the same time, owning a second home can be very rewarding. It can be the source of relaxation; a time to get closer to your family; a place to go and be a kid again; and a place to meet new friends. Someday, it can even be a place to which you retire.

Lastly, owning your own home is not like renting. You get to leave your "stuff" there to truly make it your home. You can make impromptu escapes, leaving the stress of everyday life behind. And your children and grandchildren will likely feel more comfortable in a place they have learned to call home.