With all the excitement associated with becoming a snowbird or buying a second home, important details can be missed. Our hope is to help you save time, and possibly money, by learning 6 mistakes snowbirds make. Nearly half of our clients live the snowbird lifestyle. Thus, we have a lot of data and conversations to pull from. Read on and set yourself up for success on the snowbird / multi-home journey.
Underestimating Costs – #1
It is important to look beyond the price of a second home to other snowbird costs. These include taxes, insurance, maintenance and renovations (especially of the emergency or unexpected kind), utilities, HOA fees, transportation costs (airfare, automobile transit, pets, etc.), furnishings, technology to “run” the home from afar, and more. We help you create a second home budget that factors in these expenses and model them out with adjustments for inflation.
If you plan to run a business out of your second home and rent it through VRBO, Airbnb, or some other provider, there are additional financial factors to consider. These include the cost of professional property management, overhead fees, occupancy levels, etc. Also, be sure the rental is properly insured, perhaps adding additional umbrella liability coverage. See mistake #3.
Overestimating Usage or Rental Income – #2
Most people considering second home ownership have a vision that includes using the home as a gathering place for friends and family. Dreams of magical dinners, family game nights, and plenty of pool time with the grandkids are abundant. We often hear that the dream plays out as planned for a few years but doesn’t remain consistent as people age and family members find other interests. A place that once enabled memory making can become a nuisance or reminder of times past.
The same can hold true for a home that you use as a rental. Maybe you want to personally use the home at peak times when you have the most opportunity to rent it. Or you receive a few poor reviews on the rental listing site for things beyond your control (i.e., power outage, broken air conditioning, etc.), and can’t find interested renters. Economic downturns or unexpected events, such as a pandemic, can wreak havoc on the home rental business. Be sure you can maintain the home through ups and downs and over the long-term without consistent rental income.
Under Researching Location – #3
Before committing to a second home, test the waters by renting a property in the area for a short time. This gives you a firsthand experience of the location, its amenities, and whether it aligns with your expectations. It can help you avoid making a large investment in a place that doesn’t ultimately suit your needs or preferences.
A previous blog, Buying Waterfront Property, provides important location considerations if you plan to purchase a home on that water. It also includes resources to help you assess location fit. These include local real estate agents, local government, and conversations with community members and/or engagement with local social media sites where you can ask questions and read other’s contributions.
Little or No Exit Planning – #4
When purchasing a home with intentions to use it as a rental property, carefully consider how you title it. Owning a rental property in an individual’s name can subject that person to financial liability. Typically, it is advised to own it as an LLC or other entity that would have creditor protection. Also consider having an operating agreement and addressing estate planning. It would be best to obtain legal advice regarding your situation before you close on the property.
Managing Your Health – #5
Have you thought through and discussed with your family what will happen to your home(s) in the future? We have experience with clients who buy a second home “for the family” and later find out the family isn’t interested in managing the home over the long haul. Have you carefully planned for how your real estate will be handled in a situation such as separation or divorce? What about if you pass? Second homes can be costly, and your heirs must have the resources, time, and interest to take on its maintenance.
Managing Your Health – #6
As you may already know, it can be difficult to manage healthcare across locations, even when everything is going well. Add in a health emergency, and managing treatment, doctor’s visits, and more can be extremely difficult if you live in multiple locations. Remember that your health insurance coverage needs to work across states. Also, ensure that you have reputable healthcare facilities and services within a reasonable distance of each home.
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