SmartMoney – Though investment properties have struggled in the down economy, real estate agents in destinations like Palm Springs and Palm Beach are starting to see bursts of activity again, with a common thread in many second-home markets: Cash is king.

As the owner of several rental villas in Italy, Lisa Byrne is no stranger to investment properties. So when the San Franciscan saw a growing vacation market in her own backyard, she snapped up a fixer-upper for under $2 million. Though remodeling costs are bound to set her back, she’s not worried about recouping the money. Why? She paid in cash a sizeable sum but one that eliminated pesky mortgage payments and will let her keep more of the rental income.

Though investment properties have struggled in the down economy, real estate agents in destinations like Palm Springs and Palm Beach are starting to see bursts of activity again, with a common thread in many second-home markets: Cash is king. After sitting on the sidelines for two years, buyers with discretionary income those who don’t have to choose between, say, helping send Johnny to college and nabbing that lakeside cottage are becoming card-carrying members of the mortgage-free crowd. Indeed, almost 60 percent of investment-home buyers bought with cash last year, up from 48 percent in 2009.

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