When the Hohnstines became true empty nesters -- their children finished with college -- the couple bought a vacation home. They figured if they enjoyed their vacations near the Delaware shore, they would eventually retire there as well.

As it has turned out, the home near the beach is a magnet in attracting their children and grandchildren, and because the home is only a three-hour drive from their primary residence in Virginia, many weekends have been spent there since they bought in 2002, Lyle Hohnstine said. Soon, the home at the Village at Bear Trap Dunes in Delaware will be their primary home.

Baby boomers with discretionary dollars to spend, such as the Hohnstines, have fueled an increase in vacation-home sales in recent years. The National Association of Realtors reported that a record 1.07 million vacation homes were sold in 2006, a 4.7% increase over 2005.

Though 79% of buyers said they bought the homes to use for vacations or as family retreats, 34% said a reason for buying was to diversify their investments, according to a Realtors survey. Twenty-eight percent said they planned on using the vacation homes as primary residences in the future, and 25% said the tax benefits were a reason to buy. And 21% bought because they had extra money to spend; 18% of buyers planned to rent out their vacation homes.

But financial planners and real-estate professionals suggest using caution before jumping into the commitment of owning a vacation home, an investment often loaded with hidden costs. On the other hand, "no one is going to have fun basking in the light of their municipal bond," said Kenneth A. Kamen, the president of Mercadien Asset Management in Princeton, N.J.

"A good vacation home is a great way to bribe your kids to want to hang out with you when they're older," he said.

Before cementing a decision to join the growing ranks of vacation-home owners, consider the following:

1. Is it practical?

It's easy to become enamored with a place while on vacation, leaping to the conclusion that owning a home in the locale would allow the entire family to more frequently enjoy a little slice of paradise. Some of Kamen's clients figure that they're spending a good chunk of money on vacations every year anyway -- so why not invest in a vacation home?  

His answer: "When you buy a vacation home, you're committing to spend that (money) going forward." Not only that, a buyer is committing to spend most vacation time in a particular place and giving up some of the flexibility afforded by staying in a hotel or home rental.

Sure, the place could be rented out to recoup some of the costs, but then the owner must take on the role of a landlord, effectively starting a small business, he said.

Often, when costs including real-estate taxes, insurance and utilities are factored into keeping a vacation home, families are better off renting a home for vacation instead, said Sheryl Garrett, the founder of the Garrett Planning Network in Shawnee Mission, Kan. In addition to vacation flexibility, this means families can forgo time and energy spent on chores such as cutting the lawn or the cost of hiring a maintenance crew.

2. Will it be affordable?

It's difficult to justify spending $250,000 on a property that you can use only four times a year, Garrett pointed out. That's why it's critical for people to estimate how much they will be able to use a vacation home and what the home will actually end up costing them.

This estimate should include travel costs -- not a small aspect when a home isn't within driving distance. Plus, don't forget insurance, which often can be more than 50% more expensive than insurance on a primary residence, Garrett added.

Kamen's advice: Figure in all of the expenses associated with the vacation home, then add 10% to 15% as a buffer for when the unexpected happens, such as when the water heater needs to be replaced or bad weather damages the property. If you're going to have to count pennies to make mortgage payments, maybe a second home isn't the best idea, Kamen said.

3. Consider future plans

However, if a buyer is considering a vacation home as an eventual retirement home, buying in advance to try out the new location could be smart, Garrett said.

If it's a legacy the home buyer wants to create, driven by the thought that future generations will want to use it for years to come, buying also isn't a bad idea, Kamen said. After all, even if the home is sold, children and grandchildren may be able to benefit from the asset.

4. Choose a location

Before starting a home search, decide what the home will be used for, advised Elizabeth Hudgins, a real-estate agent with Prudential Network Realty in Jacksonville, Fla. For example: Will it be a getaway during winter, summer or both?

Also consider whether nearby recreational activities are important or if it's a place for retreat and solitude, said Patti Grimes, the vice president of sales and customer relations for Carl M. Freeman Cos., which built the golf community the Hohnstines have a home in.

Think about the ideal proximity to a primary home as well. The Delaware shore communities built by the firm are popular with people from Washington, D.C., Philadelphia, New Jersey and New York because the drive to the homes isn't unbearable, Grimes said.

"What we found is that people spend more time at their vacation homes today than years ago," she said. The difference is they're often not spending it weeks at a time; instead, they're leaving work early on Fridays and driving to their vacation homes for weekends away, Grimes said.

5. Do the research

After deciding on the general location, Hudgins suggests starting a home search online.

A real-estate agent in the area also can be of particular help in finding a vacation property because of his or her local knowledge, said Christine Karpinski of Austin, Texas, an author and speaker on vacation-home rentals. If possible, use an agent who specializes in selling second homes. Buyers and sellers can search for those with a "Resort & Second Home Property Specialist" designation through Realtor.com's "Find a Realtor" link.

6. Fools rush in

It's fine to look at homes while on vacation, but never buy one at that point, Karpinski advised. This may be easier advice to follow now than when the real-estate boom was in full swing and vacation homes were "selling like hot cakes," she said.

Instead, take the knowledge from the trip and do some homework, she said. There's not any urgency to buy a vacation home, so buyers should take their time, she added.

7. Is it rentable?

Many second-home owners don't buy a home with the intention of renting it out. But it's wise to know if a property is rentable at the time of purchase for a couple of reasons, Karpinski said.

For one, people often rent out a home if they're not using it as much as they originally had expected, she said. A rentable property might also be a selling point at resale, she added.

"There's definitely a honeymoon period when they buy it," Karpinski said. "After two or three years, you realize your life is way too busy," and visits to the home may become infrequent.

Before buying, ask about renting terms if applicable. For example, some condo communities have leasing restrictions, Hudgins said.

For single-family homes, remember it is often easier to rent property when there are other rentals around it, Karpinski said. Secluded homes could have less success attracting renters.