GMAC Real Estate Beware of Short-Term Speculation
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Beware of Short-Term Speculation

Takeaways

  • Real estate is a long-term investment.
  • Short term speculation can put an investor on the wrong side of a real estate "bubble."
  • Don’t get into a second home you can’t afford.

Did you know?

  • Around a quarter of investment second home owners paid cash for the property.
Short-term real estate speculation can lead to financial pain. It's true that real estate can be a great investment, but it's a tough way to get quick profits. Even an investment second home should be viewed as a way to make money over the long-term. Real estate is very cyclical with housing “bubbles” expanding, sometimes rapidly, and then just as suddenly bursting. These cycles can catch the short-term speculator with their pants down, so to speak, with a property that is suddenly worth much less than the purchase price. If that buyer leveraged the purchase expecting a fast profit some real financial pain might result.

For this reason it’s important to understand the investment you’re making with a second home and have a clear plan of how that new property will be paid for, or how it will generate income for you. Luckily most second home buyers understand real estate is a way to earn steady, if potentially modest, profits, and realize when the real estate cycle is down they still hold a tangible asset that will most likely eventually rebound.

Look at the Big Picture

Taking a long-term approach to real estate investing helps protect the second home owner from the volatility of both the real estate market and other, riskier investment vehicles. Obviously if you are buying a second home solely for your personal use, enjoyment of the property is most likely taking precedence over any profit potential. Second homes bought for investment or mixed-use where you make use of the real estate and rent it out at other times to generate income require a certain amount of research and thought. If you do your homework it’s possible to find a second home that will provide steady rental income and likely appreciate in value for that day when you decide to sell and move on to your next piece of real estate.

Search for Second Homes for Sale

To search for a selection of second homes for sale, please visit lifestylehomesearch.com, or visit the website of a GMAC Real Estate Office that serves the area where you'd like to buy a second home. To learn more about buying Second Homes or Vacation Homes, explore the rest of this section, or contact a GMAC Real Estate Agent.