Thinking about a second home? Read this before you commit.
In my chosen career of “killer of hopes and dreams,” I’ve had many conversations about the pitfalls of owning a second home. Here are some thoughts from a 2015 blog.
Consider this before you buy a second home.
People must be feeling good about the economy because second home ownership is on the rise again. Vacation home sales increased over 10% in 2012 and 11% of home purchases were second home in that year. (Source.)
Some folks find their second home is all they hoped for and more. More time with family in a peaceful setting, less expensive than a hotel room, and more comfortable with your own things surrounding you.
However, it’s not always wine and roses.
My adult kids and grandkids will gather here regularly for picture perfect holidays and getaways.
Reality: Your adult kids probably have other parents to visit (in-laws) and as the grandkids get older, their time is dominated by sports tournaments, friends, and other interests. You may be paying for the upkeep on a home that is not visited as often as you thought.
Real estate in (name the city of your choice) is always a good investment.
Reality: Real estate in vacation home locations is often more volatile than work-a-day cities. When recessions happen, the inability to keep the second home can lead to sharp drops in price. It can also increase inventory and property could be difficult to sell for a prolonged period.
Also, a house is not an asset that you can use to pay for medical costs or groceries. Yes, it looks good on the balance sheet, but it’s not helping you pay the retirement bills. In fact, between maintenance, HOA dues, utilities, cable, and property management fees, you may be paying much more per year than the increase in value of the property.
I’ll never get tired of (name the city of your choice).
Reality: You may find yourself longing for some variety in your travel, but feel tied down to one place due to the carrying costs of your second home.
Keep in mind when you are thinking of purchasing a second home the real, total costs (not just the mortgage) of the property. A summer rental, while not building equity in a home, will probably cost much less.