“I need a second home like I need a colonoscopy.”
Spent an hour on the phone with Wade Shealy, who is probably the most seasoned and knowledgeable man in the country when it comes to second home real estate, certainly the most honest. Wade is the founder of 3RD HOME, a web site for second home owners that expands second home ownership by creating a home swap of vetted owners and properties. It’s like belonging to your very own Exclusive Resorts. The ticket in: you must already be a second home owner — condo, home, ranch — and then you can exchange your home to stay at a THIRD home for — are you ready? $495 a week. That is not a typo. It costs you $495 to join 3RD HOME, and then $495 per week per stay at a home that matches the value, categorized as keys. All the homes and owners are scrutinized so you know you are not just getting a five star location, you are putting nice people in your property.
The way this Nashville, TN -based company (The Southwestern Company is a partner) got started is almost a history of the second home sales market for the last three decades in this country. Wade is a veteran second home Realtor who earned his stripes selling vacation homes in Hilton Head, South Carolina.
“I sold out my last development in 2006 – Hampton Island off the coast of Georgia,” says Wade. “Uber hot when Ben Affleck bought a home on Hampton Island.”
What did he see coming down the pike? People needing second homes like they need a colonoscopy.
“I was sitting, waiting for it to turn around, and I waited. And waited, ” says Wade. “So I started looking at options for owners to get more value from those homes.”
Either make cash flow, or leverage them against something. Problem is, says Wade, when folks are dishing out $7000 a month in mortgage, insurance and other second home housing costs, the last thing they want to hear is “let’s go skiing this year” when they own a home at the beach.
But with 3RD HOME, they can trade the beach house for a ski chalet for $495. per week. It’s a way to stretch the vaca home to more than one location without breaking the bank or — horrors — buying another vacation home.
See, once upon a time, people bought vacation homes for the right reasons: family fun. Like my husband’s grandfather, who bought a clapboard cottage in Drakes Island, Maine, in 1947 for generations of Evans to enjoy — my daughter got married nearby — and we took the kids there every summer to see family and create memories.
Second homes have been sought out by the affluent and semi-affluent for years. Exact figures on the number of second homeowners in this country are hard to find because no one, not even the NAR, tabulates. Wade estimates there are 50 million vacation homes in the world, and ten million in the US. That’s lake homes, ski homes, beach condos.
The original intent was to sell second homes for fun personal use.
“In 1984, in Hilton Head, SC, we were instructed to find out what activities make the family happy and provided enjoyment and sell against that,” says Wade. “But then, salespeople started selling second homes as an investment, which was really against the law.”
If the Realtor could only push personal use as a reason to buy, families only needed one house. But once agents started talking appreciation and investment opportunities, the lid blew off sales. It was really a bit of a Ponzi Scheme. As the market flourished, people saw the potential to make big money fast. There was a small pool actually buying for pleasure — a much larger pool was flipping vaca homes like pancakes. When the musical chairs stopped, whoever was left holding the (now really high-priced) real estate had no way to unload it.
Developments and homes no one wanted were no longer such a great investment. Like most real estate, the “crap” that went up alongside good product got hit first and hardest. But Wade says we are probably going to see a lot of second home inventory for a long time.
“People didn’t even care the unit or floor, they were going to flip the contract before the unit was even built,” says Wade.
Was this only in Florida?
“It happened everywhere,” he says. ” A lot of the problems were brought on by the industry itself.”
Now, the industry has to sleep in the bed they built.
Of course, one reason why I started this blog was because I saw this coming, too, from a journalists’ perspective. I knew there was no one major place where you could organize all the second homes in the US — hec, Wade’s the first person who could ever give me a firm number on how many there are. Recall a few months ago when the Census Bureau mistakenly thought there were way too many vacant homes in Florida and Maine? Hello, those are vacation homes. They are vacant when the owners are at their primary residences.
Which is another thing about second homes: people who work cannot use them that much, really. Which is why I am seeing areas closer in to Dallas — Beacon Hill at Cedar Creek Lake, one hour east of Dallas — and place like Possum Kingdom, where Dallas powerhouse Realtor Allie Beth Allman has a second home, flourish. Most upper middle class people can afford a second home, especially as they downsize the family home as many of my peers are doing, to smaller digs (less upkeep, lower taxes) and get a spread in the country, beach, mountain or at the lake.
So I asked Wade for buying tips. Right now really is a great time to buy a vacation home — stuff is out there for 20 cents on the dollar. Not all of it is even worth it, however, which is why I insist on visiting every property I endorse on SecondShelters.com. In fact, Wade tells me some of the worst “crap” is being snapped up for senior citizen retirement housing. Yikes, real inviting. How to spot that? Look for developments built on the periphery of an area — far back from the beach, or if not beach front far up the river channel. Why would you buy something buried from the prime attraction when you can have the prime now for so much less?
Second homes that are selling, that have always retained value, are in extremely unique, highly desirable locations in demand, with a limited supply: Aspen. But anything where you have to drive 30 minutes out of Aspen, no.
Location or product that fits what families are looking for in a second home it will always be sellable in the future, says Wade, who also thinks it will take ten years to clear out the crap. Just about any development that wasn’t halfway completed when the market cratered was halted. Developers cannot carry the cost of infrastructure or maintenance — it costs a million dollars a month, says Wade, to keep a golf course open! Can you imagine the scenario when 10 or 20 homeowners were left to cover the club’s expenses? There is a notorious story of greed at The Yellowstone Club, where owners had the means to buy the club from the bank. A similar situation has taken place at The Club at BlackRock, where homeowners have bought back the club, and amazing bank-owned real estate is on the chopping block.
Want to know how the second home market will fare? Look prior to 1990, and how Realtors sold then. No one in this market is flourishing, says Wade. There are healthier pockets where people are hanging in, but when all is wrung out the industry will be much smaller. He advises people to look at the amenities existing in place when they buy.
“Ask yourself, are you happy with them? Because that may be all there ever is,” says Wade.
And if you have a second home and would like to make it more of a piggy bank, historical options were just to rent it for a little more income.
Now, says Wade, the 3RD HOME option is to use your second home as a ticket to travel to other locations in the world… without paying rent.
The added benefits of joining 3RD HOME don’t stop there. Readers of Secondshelters.com now have the opportunity to join for free, compliments of Candace Evans! Click any of the hyperlinks within Candy’s blog text, or go to http://www.secondshelters.3rdhome.com