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Making Money On Second Home A Fantasy?

Jeff Brown, a business columnist for the Philadelphia Inquirer, believes a second home is an indulgence if it�s being acquired primarily or exclusively for one�s own use.

The following quotes are from a recent article of his:

�Say you bought a place for $300,000, borrowing $240,000 at 6%. Suppose the property appreciated 6% a year � about double the inflation rate. After five years, the property would be worth just over $400,000, for a $100,000 �profit� on the $60,000 initially invested as the down payment. But interest would have cost about $70,000, reducing the profit to $30,000.

�A $30,000 gain on a $60,000 investment over five years is an annual return of about 8%, which is nothing special. But you might also have paid $5,000 a year in real estate taxes, and another $1,000 a year in homeowner�s insurance. That�s $30,000 over five years�erasing your profit.

�If you pay a standard 6% realtor�s commission to sell the property, you�d be $24,000 in the hole. And we haven�t considered maintenance and utilities, cost of furnishings and traveling to the property.

�Sure, some people make money on second homes, but I bet many are making less than they think.�