Considerations When Buying a Second Home

FESCH.TV INFORMIERT:

Many people have a dream to someday own a second home. Whether you want to snowbird during retirement, or are interested in purchasing a condo near your kids or grandkids, owning property to make domestic or international travel to your favorite places easier seems appealing.

However, owning a second home often comes with more stress than investors realize. Before you make a purchase, our team at FPC recommends considering a few different factors.

First and foremost, think about what owning a second property will mean for your ongoing financial situation. The initial cost to purchase your home, whether it’s a small condo or a large beachfront house, is never the only expense that comes with property ownership. You have to think about insurance, property taxes, maintenance costs, and having an emergency fund available should something break or go wrong.

Additionally, if you plan to rent that property out for income, you have to consider costs associated with having a rental income – taxes, a housekeeper, an onsite property manager – just to name a few.

These are just the financial costs of having a second home or property. There are emotional stressors that also need to be considered.

For example, many retirees think that owning a second property somewhere vacation-worthy will lead them to vacation more often in a location they love.

However, owning a second home can be rather limiting when it comes to travel. Other destinations or bucket list trips go on the back burner because visiting and maintaining your vacation home is always the priority.

Ultimately, when deciding whether or not you should buy a second home – either during retirement, or while you’re early in your career for your family – ask yourself a few questions:

One – Will this property bring me a sense of emotional fulfillment, and will I enjoy my time there?

Two – Do the expenses of owning this property outweigh the benefits? In other words, will I feel bogged down financially if I’m stuck with ongoing maintenance expenses for a home I only visit periodically?

Three – Is there an alternative option that makes more sense?

For many of our clients, looking for a long-term rental through sites like Airbnb or VRBO ends up costing less in the long run, and frees them up to travel the globe instead of visiting just one spot. They skip costs like mortgage interest, and aren’t on the hook if something breaks in the home – but they get the benefits of having a “home base” somewhere they love for a long period of time while they work or travel abroad.

If buying a second home is something you’re interested in, I encourage you to speak with your financial planning team. Buying a second home is a big decision, and getting a third party opinion, or considering all alternate options, can help you ensure you’re making the right choice for your unique goals.