Buying the (second) home of your dreams
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Buy for you, not your bottom line
Once you decide to buy after weighing the alternatives, remember that in most cases, a second home is a lifestyle purchase, not an investment. "If you have some lifestyle element to it, even if it's not a great investment, it's of value to the family," Edelman says.

"For the majority of people, real estate is a really poor investment," Geiger says. "Most people invest with a rearview mirror, and what happened in the past doesn't have anything to do, necessarily, with what's going to happen in the future. All markets run in cycles, and if it's been running in a really hot cycle for five straight years, it's probably getting ready to correct."

Even assuming that the second home will appreciate at an average rate of 3 percent to 4 percent annually, the maintenance expenses will eat into the gain.

"If you took that same amount of money and just put it in CDs, for example, you get a straight 3 percent or 4 percent return, and you don't put any time or upkeep into it," Geiger says.

Bankrate tip: Thanks to the subprime mess, it's possible to snap up a good deal on a second home, particularly in markets with a large speculative content, such as South Florida, Las Vegas and Southern California. But home prices in these areas are more volatile and, because they're resort areas, the property may be difficult to resell during a recession or slow-growth economy period, says Marc Louargand, president of the American Real Estate Society.

Time to move on
Just as you weighed your options before purchasing a second home, you need to keep an eye out for signs that it's time to sell. When the burden of ownership exceeds the joy that you receive from owning it, it's time to move on.

Real estate is a pricey investment, and many people do not use their second home as often as planned: Two-thirds of second home homeowners spend four weeks or less per year in the home, with half using the home for two weeks or less, according to a 2006 study for the Research Institute for Housing America.

But getting out can be as expensive as getting in, especially if you're selling the home for a loss in a down market. Conversely, if the property appreciated significantly, you may face steep capital gains taxes.

If the second home was used as a rental property, Michael Eisenberg, owner of Eisenberg Financial Advisors, says that homeowners have options for reducing, delaying or eliminating any capital gains tax. With a personal residence, up to $500,000 of gain is excludable for joint tax filers, and you can turn a rental property into a personal property by making it your principal residence for two years.

Another option: To defer the capital gains tax on a rental property, the owner can do a Section 1031 like-kind exchange, exchanging the rental home for a like-kind rent-producing investment, such as another rental home or even a retail store.

Bankrate tip: Know the rules on tax breaks for second home homeownership. Also, keep your long-term plans for the property in mind when you title the property.

"There's a huge benefit to having the property titled the right way if the surviving spouse is going to sell the property," says Robert Burkarth, regional vice president of Householder Group. "If we title it the right way, the surviving spouse will inherit it at full fair-market value and pay zero taxes to sell it." For that reason, Burkarth says, the property should be titled in the name of the person who would keep it if the other spouse were to die first. Of course, the proper documents would have to be drawn up to protect the spouse whose name is not on the deed in the event of divorce.