Can You Afford A Second Home?

Did you know that here in Carmel by the Sea, as of 2010 we have 48% of our homes that are owner occupied?  That leaves over half that are either rented out or left vacant a good part of the time.  A great place to find a second home, right?

Most of us have dreamt of having a vacation home. It could be on the beach in New England, somewhere tropical, or even somewhere foreign. Many consumers don’t realize that with the proper research, their dream vacation home might actually be in reach. Instead of visualizing how relaxing vacations and weekend getaways could be, why not try to make your second home a reality?

The first step to purchasing a second home is organizing your finances to make sure you can afford it without compromising the security of your other assets.

These tips can help you assess whether or not you are ready to invest in a second home.

• Figure out what you can reasonably afford by looking closely at your income, savings, and spending habits. Future expenses need to be factored into your budget, such as the likelihood of replacing a car or adding to your family.
• Check each of your three credit reports well before you start looking at houses or shopping for lenders. If your credit score needs improvement contact a credit counseling agency or ask your mortgage company for advice.
• Create a budget. A budget not only clarifies your current financial situation, but it also helps you identify places where you might cut back to save for a down payment.
• Consider tax implications.  Purchasing a second home has its benefits, but you should make sure you consider funds for property taxes on the second home as well as additional income tax if your home will be rented out. You should research the area’s property taxes because some locations have significantly higher or lower property taxes.  Ours here are approx. 1.1% of the purchase price.

If your research proves you are not quite ready to start looking for your vacation home, try not to get discouraged. It’s better to wait than to put your financial security at risk. If you feel that you are financially stable enough to take on a second mortgage, now is a better time than ever because interest rates are extremely low.

One of the most sought after areas for 2^nd home purchases is the Monterey Peninsula.  Carmel, Pebble Beach, Monterey, and Pacific Grove, all for somewhat different reasons.  Each has their own separate personality. This is considered one of the most beautiful spots on earth, and we have a mild, Mediterranean climate, never too hot or cold. 


A lot of second-, third- and fourth-home owners come here from Arizona or Texas for the summer. The population is small, but for a community this size we have a disproportionate amount of restaurants and cultural events. The most important collector-car show in the world is here, the Bach Festival, Big Sur Marathon — there is always something going on. The Pebble Beach Resort hosts a famed food and wine festival and an annual PGA tournament, in addition to huge events such as the U.S. Open.

Carmel has upscale beach-town flair and the most restaurants; it attracts those who want to be on or near the beach and walk to shops and eateries. Monterey is the biggest city; it has more full-time residents and a "mini-San Francisco” feel.  It also is the least expensive; second homes start around a half-million. Pacific Grove, on the northerly tip of the peninsula, is kind of a quaint Victorian town. It's the last 'dry' town in California, and priced between Carmel and Monterey. 

Carmel Valley is completely different, agricultural and rural, with a few wineries. People go there for the sun. We get this coastal fog and 'June gloom,' and there you don't.

Pebble Beach has the highest prices. The limited number of ocean front lots on the famed golf course are among the most desirable pieces of real estate anywhere, the choice of second-home owners like Charles Schwab. It is a very small universe — there are only 28 such properties and the tear-down value is $10-20 million just for the lots. Four years ago, you couldn't find anything in Pebble Beach under a million. Now there are 18 properties in the $500,000’s to $900,000’s."

The peninsula has long been popular with artists and actors, and more recently with second-home owners from Silicon Valley. We have a lot of international buyers, but the bulk has always been Silicon Valley, San Jose and San Francisco.   And it looks like we’ll be getting a new wave of millionaires soon with the Facebook kids! 

A look at three Monterey Peninsula neighborhoods:

• Pebble Beach Resort: The Pebble Beach Co. owns 5,300 acres that contain three hotels, four golf courses, spas, an equestrian center, beach club, tennis and a variety of residences. While the handful of ocean view lots are the province of the ultra-rich, there is a range of single-family homes, condos and townhomes all throughout the resort, and just last month a home sold for only $555,000!  There are several listings under $1 million. Of 90 properties now for sale, more than half are priced over $2.5 million, and more than third are over $4 million. Properties near the two large resort hotels also command a high premium: Condos behind the Inn at Spanish Bay run from $2 to $3 million, and townhomes at the Lodge at Pebble Beach are $3 million to $4 million.

• Carmel-by-the-Sea: It long has been home to famed visual and performing artists and writers. Carmel has the most dining options on the peninsula. The desirable second-home area is downtown, where you can walk to shops and the beach. You can get a nice cottage in that prime area for $1.3 to $2 million. Of the 100 or so properties for sale, most are in the $1-5 million range.  Only five true oceanfront homes exist; there’s one on the market now for $19.2 million.

• Golf Communities: While Pebble Beach Golf Links and Cypress Point are not part of true golf communities, several other courses are. Tehama and The Preserve are upscale, inland developments with members-only courses. Carmel Valley Ranch is a golf resort with homes and townhomes for sale. It is in the midst of an upgrade. Former Fort Ord is being redeveloped, eventually, into a 400-acre community with a hotel and spa, 125 homes and 175 condos. The project already has two highly regarded golf courses, Bayonet and Black Horse, open to the public. The first residential neighborhood, The Enclave at Cypress Grove, just began selling 29 lots in a gated development with views of Monterey Bay. Unlike Pebble Beach, residents can get golf memberships. Lots go for $380,000-$500,000.

This month's pick property: 

1131 ARROWHEAD ROAD, Pebble Beach $740,000 Beds: 4 Baths: 2.5

Move-in condition in this price range in Pebble Beach is hard to find. But, here it is, and it features an eat-in kitchen as well as a separate formal dining room. To supplement the spacious kitchen is an adjacent inside laundry with lots of additional cabinet space. The home is located on a quiet lane in the PG school district.  SqFt: 2,025 Lot: 10,600 Sqft lot  Check out my website for photos.  Pretty.

® Patty Ross, KRXA Radio Show #226  3/2/12