Head Off the Beaten Path
For Affordable Second Homes

By JUNE FLETCHER
Staff Reporter of The Wall Street Journal
From The Wall Street Journal


Orthopedic surgeon Regis O'Keefe and his wife, Carol, scoured the
Adirondacks in search of a lakefront vacation home with lots of land. But
the Rochester, N.Y., couple found nothing in their price range.

So they started looking off the beaten path in the nearby Canadian province
of Ontario. And there they found it: a charming two-bedroom cabin on 34
acres overlooking a lake -- all for less than $150,000.

"It's unbelievable what you can get here," says Mrs. O'Keefe. "There's so
much land and so few people."

Forget the Malibu beach house, the Aspen condo and the Martha's Vineyard
bungalow. With prices in traditional second-home communities soaring through
the roof, savvy house hunters are finding great deals in up-and-coming
getaway spots from Belize to West Virginia. While these places still lack
the cachet of the Hamptons, they are scenic, untrammelled and, increasingly,
even fashionable. Best of all, they are still relative bargains.

In the small Appalachian-foothill town of Berkeley Springs, W.Va., a
three-bedroom vacation chalet sells for $90,000. In Pahrump, a sunny outpost
about an hour's drive west of Las Vegas, $198,000 buys a three-bedroom house
with a game room on an acre-plus. There aren't even any listings at that
price in Aspen.

Price isn't the only attraction. As suburbia continues to spread and air
connections improve, some of these addresses are becoming more accessible.
Berkeley Springs used to be considered too long a drive for Washington
day-trippers, but it's only about an hour and a half from some of the
capital's new bedroom communities. Mrs. O'Keefe says it actually takes less
time to get from Rochester to her place in Ontario than to many parts of the
Adirondacks. Air travel abroad is also getting faster and cheaper from many
U.S. cities.

"With weekend traffic, it takes six or more hours to get to Lake Tahoe,"
says Charles Coustan, a senior director at a new-media company in San
Francisco who is currently shopping for a second home in Phuket, Thailand.
"In that time, you can almost get to Thailand."

Overseas buyers have the added advantage of a dollar that remains strong
compared with most currencies, low interest rates, a softening of
international trade barriers and better access to listings -- especially on
the Internet. U.S. house hunters who have been priced out of Tuscany, for
example, are now going to Portugal's Algarve region, while intrepid types
who might have thought about Hawaii or the South Pacific are checking out
places like Nelson, New Zealand. There, on the coast of the country's
sparsely populated South Island, a four bedroom, mountain-view house with a
deck can be had for $178,000.

"Three or four years ago, there just wasn't this sort of interest," says
David Michonski, chairman of the international wing of the National
Association of Realtors. "Back then, the only way you could find out about
properties in many countries was to look at a bulletin board in a local
bar."

Of course, there are reasons why some of these new bargain hot spots are so
cheap. While a jungle-view hacienda in Belize, in Central America, may
confer major bragging rights, the usual hassles of buying a home are
compounded by the distance. Many countries have no laws to protect consumers
should the deal go sour, few have multiple-listing services, and financing
can be almost nonexistent for foreign buyers. Rules restricting foreign
ownership are common (in Thailand and some parts of Mexico, foreigners
aren't allowed to own the land their home sits on), and the mechanisms for
recording titles may be lax.

Even in the U.S., buying in backwater towns has its drawbacks. The cultural
high point in Berkeley Springs, for example, is the annual Apple Butter
Festival, and the closest major airport to Pahrump is an hour away.

Still, at times like these, home prices at or below $200,000 -- and in many
cases, below $100,000 -- exert a powerful pull. Just ask Fred and Susan
Wittmer of Doylestown, Pa., who bought a new three-bedroom,
two-and-a-half-bath vacation home in the small village of La Cruz de
Huanacaxtle, Mexico, with an eye to retiring there in a few years. The deal
was a tangle of red tape, and the $200,000 stucco-and-red tile house
immediately sprang gas, water and roof leaks. But now everything's fixed,
and the Wittmers are thrilled. "My friends back in Doylestown laughed at me
when we told them we were buying in Mexico," Mr. Wittmer says. "But I notice
they're all lining up now to visit." It seems that a location with a special
amenity, like a coastal community, offers the most desirable location for
those seeking the zest of a second home.

Here are the inexpensive getaway spots for second-home buyers:

U.S. Properties

Berkeley Springs, W.Va.

Berkeley Springs, a mid-19th century watering hole about a two hours' drive
from Washington, D.C. and Baltimore, is undergoing a revival as vacationers
and retirees snap up its cheap ski-slope chalets and gentleman's farms.
Among them are retirees Ken and Joyce Frazier, who bought a four-bedroom
brick rancher on more than 19 wooded acres for only $170,000. "I just had to
get away from the hustle and bustle," says Mr. Frazier, who moved to
Berkeley Springs from Savage, Md. in July. "And after looking up and down
the East Coast, we couldn't find any better views -- or prices."

Berkeley Springs real estate broker Jim Miller says that three-bedroom
vacation chalets start at about $90,000, and that for $150,000 to $200,000
you can get a 2,000-square-foot home that's "really decked out" with
features such as saunas and whirlpools, plenty of acreage and river views.
He adds that the area recently has been "discovered" by vacationers and
retirees, and that sales in his office have increased about 30% in the past
three years. Property taxes on a 2000-square-foot home run about $900 a
year; sales tax is 6%, and there's a sliding-scale state income tax with a
maximum rate of 6.5%.

There's not much high culture in Berkeley Springs -- the highlight of the
year is the annual Apple Butter Festival -- but there's still plenty to do
if your tastes run to hunting, hiking, fishing, horse-back riding, skiing
and water-sports. And of course, there's Coolfont, a popular New-Age spa
specializing in stress reduction, body-sculpting and massage. "It's a very
laid-back town," says Mr. Miller.


Hudson, Fla.

Pasco County, on Florida's West Central coast, was considered a backwater a
generation ago. But now citrus groves, cow pastures and mobile home parks
are giving way to the sort of sophisticated fare found in Sarasota and
Naples. "This is like what Key West was 15 years ago," says Roxanne
Bracewell, a real estate agent in Hudson, one of the hottest areas in the
county. “People are ripping out $80,000 homes and building mansions."

Although her agency's sales have tripled since last year, Ms. Bracewell says
that there are still a number of good buys in the $150,000 to $200,000
range, some fronting the Gulf of Mexico. She adds that because the area is
still largely rural, wildlife -- including bald eagles, ospreys and
flamingoes -- can often be seen from your backyard deck.

Of course, you still have to travel to Tampa, about 40 miles away, for urban
amusements, but there are lots of outdoor activities like deep-sea fishing,
diving, horse-back riding and golf. "We may be out of the way, but we're
starting to get discovered by buyers from overseas," says Walter Zamorski,
who sells 1,800-square-foot homes on quarter acre lots starting at $130,000
in The Estate of Beacon Wood East, a new community which has a clubhouse,
swimming pool and tennis courts. The community will have 400 units.


Pahrump, Nev.

The fastest-growing rural town in the United States, this sunny outpost with
a population of 29,000 is gaining about 4,000 new residents a year, many of
them second-home owners and retirees fleeing crowded Las Vegas. They're
drawn by the cheap housing -- average home prices are $88,000 -- and
recreational pursuits that include golf, casino gambling, horseback riding
and even vino-sipping at the local winery (the only one in the state). The
traditional Mission style of architecture predominates. A $200,000 price tag
is considered upscale: for that sum, you can buy a new custom home on an
acre or more of ground.

And for the tax-allergic, good news: There's no state income tax. Property
taxes run about 1% of the sales price, and local sales taxes run about
6.75%.

Retired Big Bear City, Calif. postmaster Fred Cook recently moved to a
stucco-and-tile home in Pahrump to escape from higher California taxes and a
colder climate and to get more house for his money. His $107,000 home is
1,640 square feet and sits on an acre of ground. "There's no way you could
get anything like that for the same price in California," he says.


Foreign Properties

Bay of Banderas, Mexico

With a snow-capped mountain backdrop, the many picturesque villages ringing
the protected waters of the Bay of Banderas on Mexico's Western coast are
drawing American buyers. Over the past two years, local broker Brock Squire
says that 90% of his sales have been to American citizens, pushing up area
real estate values 25%. "People come on vacation and then just fall in love
with the place," says Mr. Squire.

Even with the uptick in prices, housing is cheap by American standards. For
less than $200,000, a buyer can find a new 1,700-square-foot condo on the
Bay, or a 3,000-square-foot house on a hillside with water views. The
incredibly low cost of living is also a draw -- maids can be hired for $9 a
day, and property taxes are only $8 per $1,000 of value. "Compared to what
you can buy for $200,000 on the Jersey Shore, this is a spectacular value,"
says Mr. Wittmer, the Pennsylvanian who recently purchased a home
overlooking the Bay in a village called La Cruz de Huanacaxtle.

The biggest downside: Because of rules restricting foreign ownership of land
within 35 miles of the Mexican coastline, Americans can only hold property
through a bank trust.

And they must be wary not to build on lots owned by "ejidatarios," or
Mexican communal property members. "A lot of the land is desirable
beachfront, and it's very cheap, but it's also very risky," Mr. Squire
warns. About 150 Americans who built homes ranging from $50,000 to $1
million on land leased from ejidatarios in Baja, Calif., face eviction next
month under Mexican law because of a dispute over the ownership of the land.


Cayo District, Belize

With a pleasant subtropical climate, jungle rainforests, and rolling hills,
the sparsely-populated Cayo -- a rural district in western Belize -- is
drawing Americans like Jill Treat, a retired Air Force paralegal from Fort
Worth, Tex. In July, Ms. Treat bought a 2,000-square-foot new
"hurricane-proof" concrete home in the tiny village of Unitedville for
$65,000. The two-bedroom, two-bath home sits on two fenced acres, and has
mahogany doors, walk-in closets, and ceramic-tile floors throughout. "It's
nicer than most homes I've seen in America," gushes Ms. Treat, who moved to
stretch her pension dollars and to get away from Texas, which she perceives
as more crime-ridden than Belize.

Although Belize, an English-speaking country, has always been popular with
Americans, in the past most flocked to the coast. But a run-up in prices
there has brought bargain-hunters to Cayo, the country's interior, where
three- or four-bedroom contemporary-style homes on several acres of ground
can be purchased, fully furnished, for less than $200,000. Howard Oldham, a
real estate agent in Belmopan, Belize, says that many of the new houses in
Cayo have been put up by American builders, so floor plans and amenities
feel familiar to buyers from the United States. Another benefit to buying in
Belize: There's no capital gains tax.

But buyer beware: Real estate agents in Belize aren't licensed, and there
are no title companies or disclosure laws. Because there are no pre-sale
inspections of a property, closings happen quickly -- but if the property is
later found to have termites or a defective foundation, too bad. "You are
responsible for what you buy," says Mr. Oldham.


Crete, Greece

New York real estate broker David Michonski calls Greece "the No. 1 buy in
all Europe" for its rock-bottom real estate prices. On Greek islands such as
Crete, the values are especially apparent. About $200,000 will purchase a
modern three-bedroom, two-bath mountainside villa with a covered marble
terrace on more than an acre of walled land that includes olive and fruit
trees, grape arbors and a basketball court; $150,000 will purchase more than
eight-acres of prime oceanfront land. Another benefit: real estate taxes are
negligible, and transfer taxes of 6% to 15%, which are due upon purchase,
can be avoided if a buyer brings in foreign capital to close the deal.

But George Kounoupis, a Bethlehem, Pa. attorney who owns an apartment in
Greece and is also licensed to practice law there, says that rules governing
the ethical behavior of Greek attorneys and real estate agents are laxly
enforced. Buyers should especially steer clear of those who demand power of
attorney to help them purchase a home. "They're poison," he says. "If
anything goes wrong, you have no recourse."

He also notes that Greek law bars foreigners from purchasing in certain
"border" areas that are considered militarily sensitive, which includes some
parts of Crete as well as many other Greek islands. "You can't always rely
on an agent to tell you that," says Mr. Kounoupis, noting that an American
who mistakenly buys in a forbidden zone will likely suffer a protracted
legal headache.


Kingston, Ontario

Local Real-estate agent Sean Marshall says that favorable exchange rates and
low property prices have been attracting Americans in droves. Except for the
fact that you must use a lawyer when purchasing property, the experience of
buying property in Canada is very similar to that in America. Property taxes
for a $150,000 house are about $1,900; there's also a land transfer tax of
1% plus $186, plus closing costs of about $2,400. Sellers must pay a capital
gains tax of 75% of the gain, added to whatever income may have been earned
in Canada.

And, Mr. Marshall says, contrary to the idea that Canada is an icebox, the
abundant lakes in the area ensure that the climate is surprisingly temperate
both winter and summer. "Sure we get snow," he says, "but Buffalo gets five
times more."


Phuket, Thailand

Since the baht, Thailand's currency unit, was allowed to float from its
traditional exchange rate of 25 baht to the dollar in July 1997, home prices
in this trendy tropical island off Thailand's Southern coast have become
good buys for Americans. With exchange rates currently ranging between 35
and 40 baht per dollar, Wiliam Pensent, a Phuket real estate broker, notes
that about one in five inquiries to his Web site currently comes from
sharp-eyed American shoppers. "It's an easy lifestyle and there's good
growth potential," says Mr. Pinsent, a British expatriate who's lived in
Phuket since 1981.

Currently on the market is a new, two-bedroom Thai-style wooden house with
an ocean view and swimming pool for $163,000; a modern two-bedroom low-rise
beachfront apartment furnished in teakwoods and silk upholstery for
$122,000, and a two-bedroom high-rise condominium in a complex with a
swimming pool, tennis courts, sports center and restaurant for $174,000.
Transfer fees for property sales are low, ranging between 1% and 2%, and
there's a 0.5% stamp duty.

But there are drawbacks. Foreigners aren't allowed to own land in Thailand,
although they can obtain 30-year leases with options to renew. Nor can more
than 40% of a condominium project be sold to outsiders (real estate agents
don't always mention this, so the responsibility of determining whether this
allotment has been exceeded falls on the buyer). At the time of sale,
business and income taxes are computed in lieu of a capital gains tax -- an
expense a seller may try to unload on an unwary buyer. And sellers typically
require deposits of 10% to purchase property, which are only refundable if
the seller defaults.

None of this deters Mr. Coustan, the Californian who's currently hunting for
a Thai vacation home. "Sure, it's a hassle, but so is driving" to crowded
domestic spots, he says. "I want to own something exotic that I can escape
to."

If you were priced out of... consider...

St. Croix, USVI
Home prices on this crowded island have rocketed 18%,to an average $188,172,
since 1996.
Cayo District, Belize
Modest homes on more than an acre start at as little as $65,000; $150,000
almost guarantees a spacious villa.
Acapulco, Mexico
The cost of living in this resort town has become equivalent to that of
major U.S. cities.
Bay of Banderas, Mexico
Real-estate agents report that 90% of recent sales have been to U.S.
citizens. Condo prices start at about $75,000.
Adirondack region, N.Y.
The average home price in Lake George is now $209,728; one three-bedroom
home in Bolton Landing is listed at $510,000.
Kingston, Ontario
A weak Canadian dollar and improved transportation have made this a mecca
for Americans searching for charm.
Cannes, France
A 1,500-square-foot apartment in a prime location goes for about $550,000;
the beaches tend to be very crowded.
Algarve, Portugal
You can get a farmhouse on 20 acres for less than $200,000 in this
relatively unspoiled coastal region.
French Polynesia
These days, a home in Tahiti is likely to cost more than $300,000; bargains
are very rare.
Phuket, Thailand
Since the baht's devaluation in July 1997, Americans have been able to buy
fully-furnished condos for as little as $125,000.