When your second home is the first you buy

Lillie Walsh Dudley and Andy Dudley wanted to own. The couple, who have a 5-year-old son, had rented in South Slope since 2014. They started looking for something to buy about three years ago.

“Even though we’re not rolling in cash, we had a bit of savings,” said Ms Dudley, 41, who works in book publishing, as did Mr Dudley, 45. Still, not enough to buy in Brooklyn. “All we could afford would be a stretch and downgrade of our tenancy.”

Then the pandemic hit, and their apartment suddenly felt small and the city itself felt claustrophobic. The couple decided to try another house hunt.

This time, instead of looking at Brooklyn, they looked further – much further. Their plan: keep their rental and buy a second home about three hours away in the Catskills. In August 2020, they paid $221,000 for a century-old, move-in ready home in Roxbury, NY

A growing number of first-time buyers are doing what the Dudleys did: buying a second home while renting out their primary residence. Although there is no data to track this trend, real estate agents and industry watchers say that a combination of rapidly rising house prices and the flexibility of working from home in times of pandemic has prompted some hopeful homeowners to skip the first step — owning a primary residence — and go straight to buying a second home somewhere more affordable.

Vacation home purchases in general have exploded during the pandemic. In 2020, vacation home loan applications were up 30% from 2019, according to the most recent data available from the Home Mortgage Disclosure Act. Zillow, the real estate website, looked at homes for sale in vacation and weekend destinations, and in January 2019, a quarter of those markets had more page views per home than typical markets. By January 2022, half of them had done so.

Historically low interest rates and an unpredictable stock market have made real estate an attractive investment category in recent years, said Richard K. Green, director of the Lusk Center for Real Estate at the University of California. from South. But rapid price appreciation has put homeownership out of reach for buyers who don’t already have equity in the market or very high incomes, especially in already expensive metropolitan areas like New York and Los Angeles.

Indeed, home ownership across the country has dropped dramatically. In 2009, newcomers made up 45% of the home buying market, but as of January 2022, they make up just 27%, according to the National Association of Realtors. And with median house prices up 13.7% from a year agothe challenges multiply.

“Even if you’re very well paid, racking up a down payment for a million-dollar house is really tough,” Green said. “But you want to own somewhere, you want to enter the market.”

This is why some beginners get creative. Virginia Alber-Glanstaetten, 51, and Becky Goodman, 35, who are tenants in Dumbo, said Covid-era lifestyle changes, including remote working, prompted them to buy their first home together near Provincetown, Massachusetts, where they vacationed for years. . Their $800,000 budget for a primary residence wouldn’t have given them much more space than they already had in Brooklyn, they said. But on Cape Cod, where they bought, there were more options in their budget, which was around $600,000 after setting aside enough to keep paying rent in Brooklyn.

In March 2021, they paid $605,000 for a 220-year-old repairman on 1.3 acres in North Truro, Mass. “Everyone in my family thought I was crazy and that was the backslidden way of doing things,” Ms Homme bon said.

The house they purchased had long since been converted from one family into three separate units, which was part of the appeal. The couple plan to stay in one of the units while renting out the others as investment income. With their jobs still partially distant, they spent weeks on Cape Cod, keeping their rental as a home base closer to friends and work. (Ms. Goodman works in human resources and Ms. Alber-Glanstaetten works in healthcare advertising strategy.)

The allure of living in multiple locations has grown in recent years with an increase in “nomadic” living, says Austin Allison, chief executive and co-founder of Pacaso, a company that sells a condominium model for second homes, allowing buyers to buy a share of a house to use occasionally. “We see a growing cohort of people who are likely to buy four shares of four homes around the world,” he said.

Some say it’s like having the best of both worlds. “The Cape Cod house has become this really beautiful escape,” Ms. Goodman said. “And we love having our resident footprint here in the city and doing the things that we love here.”

Dylan Beaumont, 33, who owns a house in the Catskills and rents in Manhattan, put it this way: “If I’m here for a week or a week and a half, it’s like, ‘I want to go to town and get Thai food and see friends,” he said. “Then you get bored of the city, and you come here and hike.” He and his fiancee, Susanah Zeffiro, 32, bought in Margaretville, NY, in August 2020, deviating from their original pre-pandemic plan to buy a place in the city.

They paid $565,000 for the Catskills home and spent more time there than they initially thought, with the protracted nature of the pandemic. Mr. Beaumont and Ms. Zeffiro’s jobs in advertising are still partially remote, but they often have to meet clients in town or travel for work. “I love the balance,” Mr. Beaumont said.

But first-time buyers can face unique challenges when it comes to owning a home in a rural area, especially those more accustomed to apartment living. Mr. Beaumont’s home is about 20 acres, and at some point he and Mrs. Zeffiro discovered there was an underground oil tank on the property, which they had to have removed — a problem that would not have arisen if they had bought an apartment in Manhattan.

They also had minor headaches to deal with, such as replacing the water heater, dishwasher, and washer and dryer. “We’re learning a lot of first-time homebuyer lessons here,” Beaumont said.

Ms. Alber-Glanstaetten and Ms. Goodman described their Cape Cod home as ‘dilapidated with a vision’. Renovations are ongoing, which means they often have to travel last minute for contractor meetings and troubleshooting. “As first-time home buyers, we had no idea what we were getting into,” Ms. Alber-Glanstaetten said.

Although the cost of shopping in a rural area may be significantly lower than in the city, the pandemic shopping frenzy has resulted in fierce competition. Last year, first-time buyers Anna Lewkowska and Alex McKean purchased a second home in Yucca Valley, California, near Joshua Tree National Park. They bid on three different homes before landing the winning bid on a two-bedroom, one-and-a-half-bath home with approximately 2,000 square feet and sweeping views. They paid $517,000 — over $120,000 more than list price.

That’s still a fraction of what it would have cost them to own a home in Santa Monica, where the median price today is $1.9 million, according to Realtor.com. Ms Lewkowska, 31, who owns a talent management business, and Mr McKean, 32, who works in product management for a pipe manufacturing company, said they liked where they lived near Santa Monica beach, but they knew property was not affordable there. “We know real estate is a great investment,” said Ms. Lewkowska. “But here in LA, it’s extremely expensive.”

They’ve spent the last year going back and forth between the two locations while renovating the Yucca Valley property, doing some of the work themselves. They’ve dubbed the home Mandarin Escape and describe the design style as “retro modern” with gold light fixtures and a ’70s-themed sunset color scheme. The plan is to rent it out on Airbnb, starting this spring . Ms. Lewkowska said they think they can charge between $250 and $1,000 a night, depending on the season. “That was the basic economy for us,” Mr. McKean said.

Other first-time buyers are now buying second homes with the idea of ​​moving in later. Jackie Puerta, a 48-year-old ultrasound technician who lives in North Bergen, NJ, said she fell in love with Miami in the ’80s while watching “Miami Vice,” the TV show. Earlier this year, she bought a 16th-floor condo in Miami’s Edgewater neighborhood for $310,000. She spent the first few weeks staying in the condo on an air mattress. “Just to wake up to this view, it was worth it,” she said.

Although her job is in New York, she plans to move to Florida within the next two years. Until then, she rents the place out to long-term tenants to cover her mortgage and other monthly expenses. “I’m very surprised that I made it,” she said. “I always wanted to do it.”

An unexpected benefit of such arrangements? First-time second home buyers say it may reaffirm how convenient rental living can be. “It opened my eyes to what a luxury rental is,” Beaumont said. “It’s like, hey, my washing machine is broken. And a person just comes and fixes it.

Ms Dudley, the Park Slope tenant who owns a Catskills home, said one of the things they appreciate about their arrangement is that they didn’t have to leave her landlord, whom Ms Dudley described as a “human gem” who takes great care of her apartment and has never raised the rent.

Although there are no guarantees, some have used the equity in their second home to purchase a principal residence. Abbey Londer, 36, and Ahmed Bharoocha, 38, recently took out a home equity line of credit on a home they own in Big Bear, Calif., to purchase a primary residence in Monrovia, Calif., just outside outside Los Angeles. “I never really imagined that I would be able to own anything in LA proper,” Ms. Londer said. In 2019, longtime renters paid $425,000 for a three-bedroom, two-bathroom home in Big Bear, about two hours away. The house rents for between $350 and $950 a night, depending on the season, according to Ms. Londer. That income came in handy at the start of the pandemic, when her work in live events and her husband’s work as an actor and stand-up comedian dried up for several months.

Last year the couple, who have a 4-year-old and an 8-month-old, paid $1.36 million for a 2,000-square-foot Craftsman home circa 1911. “I didn’t even know it was was achievable,” Ms Londer said. “Buying this house in Big Bear has changed our lives.”

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