Vacation Retreat Provides Profit
For Purchase of a Larger Home

Editor's Note: This is the sixth installment of "Resale," a feature that profiles vacation-home owners and their residential investments. We'll take a look at homeowners' purchases, expenditures for improvements and/or mortgage costs, and their final gains upon resale -- and compare their profit to home-price appreciation rates in the area.

Purchased: February 2001 for $325,000

Sold: April 2006 for $463,000

 Home-price appreciation over five years: $138,000 or about 42.5%

 Area home-price appreciation over five years: 110%, with waterfront properties accelerating quicker than non-waterfront properties

Lake Naomi Club, a residential country club community located less than two hours from New York City and Philadelphia, is nestled on the top of the Pocono Mountains in Pocono Pines, Pa. The community has seven sand beaches on the lake, adjoins 25,000 acres of state forest and is within minutes of three ski resorts (Jack Frost, Big Boulder and Camelback). The area is primarily a summer retreat, but because of the nearby skiing, the locale is also a popular winter vacation destination.

The property:  The three-bedroom, two- and one-half-bath, single-family home on a one-acre lot is one row away from the water. The house has about 2,800 square feet of living space and a first-floor master suite with a steam-bath shower. The sellers paid $325,000 cash in February 2001 for the furnished home, which was built in 1987. They rented out the house for $2,400 a week in the summer and $1,800 a week in the winter. The community has both on-site and off-site activities for the kids, including a bus that picks them up for morning and evening activities.

The sellers: Derrick Handwerk, 47, and his wife Jenny, 39, purchased the home on Lake Naomi after searching 15 different communities that were within a 90-minute drive of Worcester, Pa., where they live with their sons Matt, 12, and Jeff, 10. "Teaching our two boys to ski was a goal," says Mr. Handwerk, who works in the financial industry. "We were looking for a home that would be a great place to vacation with our children, but also would be a good investment. We thought the proximity to Philly and New York City would be helpful in renting the home."

The couple settled on a house in Timber Trails, the gated community section of Lake Naomi Club that is only a two-minute bike ride to the swimming pool, golf course and tennis courts. "This was important to us because our two children would be able to bike ride to all the amenities," Mr. Handwerk says. "It was also appealing because it was a turn-key purchase. We just wrote a check and moved in."

Improvements: For about $4,000, they put in two propane fireplaces back-to-back in the living room and family room.

Transaction: After about 95 days on the market at a $489,000 asking price, the home sold furnished in April 2006 for $463,000 to the first buyer who made an offer. The Handwerks accepted the offer so they could move quickly on the purchase of another three-bedroom home in the same Timber Trails subdivision, which borders state game lands. Their new home cost $240,000. "We are using all the proceeds from the sale of our first house to enlarge the [newly purchased] home into six bedrooms, totaling about 3,600 square feet, which we will use ourselves and rent out as a vacation property," Mr. Handwerk says. The couple's profits from the sale don't take into account deductions for annual property taxes of about $8,000 and the 4% real-estate commission (about $20,000) they paid. Nor does it include the $75,000 or so they made renting the home out during the five years. "We were not able to get up to the house as often as we would have liked, so we were able to rent out the home and have a positive cash flow," Mr. Handwerk says.

The bottom line: "We thought the price was in line with the value of the property," says Mr. Handwerk about the final selling price. "With the railroad proposing a train close by that goes to New York City, the potential impact of casinos within 15 miles and the new community recreation center, which changes the club into a year-round vacation destination, I think the homes are still undervalued." His real-estate agent, Cathy McIntyre of Lake Naomi Real Estate, says his home appreciated well because it is in the most sought-after section of the community and is near the lake, the golf course and the pool. Carl Fiers, a broker who has been doing business in Lake Naomi since ground was first broken at the club in 1964, says that over the last five years, single-family homes appreciated 110% at Lake Naomi Club. That's far greater than the 42% the sellers saw for their property -- in part, because some of the homes on the lake sold for triple their purchase price, Mr. Fiers says. "Some of the lakefront homes purchased five years ago for $300,000 or $350,000 sold in the $900,000s earlier this year," he says. He adds, "Waterfront properties have accelerated at a faster rate than the non-waterfront properties."

Sources: www.LNC.org, www.lakenaomiclub.com and www.lakenaomi.com

Have you recently sold a second home that you think would make a good Resale profile? Email a description and a photo of your property.

-- Ms. Curry is a free-lance writer in Maple Grove, Minn.

Email your comments to rjeditor@dowjones.com.