If you're eyeing a second home as a potential home office, home-based business, or retirement spot, select one with enough footage to accommodate your future needs, or one that can be remodeled. Be sure to check zoning restrictions to see if it's legal to operate a home business in your area

Retirement reality check

In evaluating a retirement location, consider: What's the quality and accessibility of health care? Is the area safe, the crime rate low? What's the cost of living? Are there opportunities for part-time work? Is the climate comfortable? What are the cultural and educational offerings, such as Elder Hostel programs? Options How will you fund the purchase of a second home? It's a good idea to get some answers before you start shopping. The numerous cash buyers in the second-home market have the edge. But if you're not one of them, getting mortgage preapproval before you launch your search will keep you competitive if you find a hot property. For quick cash, borrowing from the cash value of a whole-life insurance policy is one option, as long as you set up a repayment plan to preserve the long-term value. Shop around for the best interest rate if you want a fixed-rate mortgage on the property. Depending on how long you plan to own the property, consider exploring adjustable-rate mortgages with, for example, fixed interest and monthly payments for five to seven years. If sellers own the property outright, ask if they would consider seller financing. You may be able to negotiate a lower interest rate, a lower down payment, and a flexible payment plan.

Renting out your retreat 

One way to defray the costs of owning a second home is to rent it out when your family isn't using it. Here are some things to consider:

• If the home is in a development with a homeowners association, ask if you're allowed to rent out your home. The answer may be no

• Limit wear and tear by renting only by the month or the season

• Use word-of-mouth advertising; rent to friends (or friends of friends) who may be more likely than strangers to treat your place with care

• It takes time to handle inquiries and deal with potential renters yourself. Is it worth the expense of hiring a rental manager who will schedule renters and handle emergencies and maintenance?

• You may want to add amenities, such as hot tubs, televisions, gas grills, and a modern kitchen, to keep renters coming back. You'll also want a locked storage room or closet for your family's possessions