Visit Montreal in December, and you’ll see that half the city has flown south for the Winter. Down in Florida, the opposite is true—tons of sun refugees there hit the slopes in Vail or Aspen every year.
Even those of us who don’t live in extreme climates often have vacations spots we keep coming back to, again and again. In fact, you may get there so often that you start to think of it as a second home. But does it actually make sense to put your money where your heart is and buy a vacation property? Before you make that leap, let’s look at what’s really involved in making that decision:
- The expense—the cost of buying a second home is much higher than the purchase price. You’ll also have to buy second sets of towels, sheets and dishes, not to mention furniture, art…all the things that will it feel like home.
- The insurance—insurance rates are higher for homes that aren’t main dwellings. If you plan on renting it out, you’ll have to cough up for an investment-property plan. If you don’t, the property will sit vacant for much of the year, which will also raise your rates. And don’t forget the fact that many vacation homes are in areas threatened by floods, hurricanes and/or blizzards. Translation? You guessed it, higher rates or add-on policies.
- Your schedule—you’ve fallen in love with a certain spot, but are you really going to take all your vacations there? Buying a second home could mean the end of wanderlust, unless you can cough up the funds to pay a second mortgage and still book another trip. Even if you’re ok with vacationing in just one spot, you need to carefully examine how many vacations you’ll actually be able to take. If your second home is reachable by car, for example, you’ll likely get there a lot more often than if you have to hop on a plane every time you want to get away.
- The end game—before you buy that vacation home, you need to think about how long it will actually work for your family. If it’s in a spot that’s really only appealing for young families and you’ve got a house full of tweens—probably not a good investment. If you’re thinking it will become the place to which you retire, that’s a different story, but then you need to make sure the home can work for an older you—first floor master, minimal stairs, that kind of thing.
- Taxes- the most dangerous of them all. California is now going after snow-birds as “part-time” residence and that could result in paying big tax bills. Check with your tax attorney before making any purchases. In short, buying a vacation home could be an amazing idea, but it could also make no sense at all. You just have to do the math for your family’s equation—and if it doesn’t add up, don’t despair. There’s always renting: almost all of the fun with none of that scary commitment
Christy Bamber BCOMM
Calgary Luxury Portfolio