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The popularity of second homes popped during the pandemic when millions of Americans sought vacation homes and investment properties. Unfortunately, many of those buyers regretted their purchases, particularly when they went beyond their budgets or rushed their decisions.
Whether you’re helping clients buy a second home or looking for yourself, here are six tips to prevent second-home buyer’s remorse.
Try before you buy
If you want to buy a second home for your own enjoyment, why not take a home in the area on a test run first? With short-term rentals, it’s easy to preview what it might be like to have a second home somewhere without committing to a months-long lease.
If you’re exploring a summer or winter vacation home, try a seasonal lease before you spend hundreds of thousands of dollars or more. This will also give you a chance to spend some more time in a place, familiarize yourself with the neighborhood and decide firsthand if you think it’s worthwhile to buy.
Tour the home in person
You can buy just about anything online, and homes are no exception. With blind offers on the rise, more buyers are willing to put in an offer sight-unseen. And while photos and virtual tours are a great starting point for homebuyers, they don’t paint a complete picture of a property. Regardless of whether it’s your first or second home, seeing the property in person can help prevent buyer’s remorse and unwelcome surprises.
Make sure the math works
A second home can come at a considerable cost, so make sure you run the numbers — including the cost of financing the purchase, property taxes, insurance, maintenance and utilities. For vacation homes, weigh the pros, cons and costs of buying versus renting. In some cases, it may make more sense to rent.
If it’s an investment property, look at comparable leases in the area, calculate the cap rate and do your research to see what the rental demand is like in that market. You’ll also need to consider the cost of property management, or if you’ll be managing it yourself, the time and effort you’ll spend and any additional expenses such as rental management software.
Wait for the right time
It’s easy to get caught up in the excitement of a competitive market. For buyers looking at a second home for vacationing, it can be especially emotional when you start thinking about holiday gatherings, connecting with family and friends, and enjoying other good times with the ones you love.
For investors, a hot market might feel like a wave you don’t want to miss. In either case, it’s important to exercise patience, wait for the right time, and never buy a second home on a whim or because you’re afraid of missing out.
Know what you want to get out of it
Before you buy a second home, make sure you know what you want to get out of it. Is the goal to escape the hustle and bustle of everyday city life or to generate income? Maybe you want to focus on building stronger bonds with family and friends.
However you decide to use your second home, you should know what you want to get out of it to make sure you feel fulfilled and satisfied with your purchase.
Create a plan for how you’ll use it
Once you know what you want to get out of a second home, make a plan for how you’ll use it. If you’re using the home for vacation or to go skiing, when and how often will you go?
If you’re buying a second home because you want to escape the summer heat or head south to warmer climes, think about what you’ll do during the offseason. Second-home ownership doesn’t stop just because you’re not at the home.
Though you might only use it for a few months a year, remember, it’s a year-round commitment. If it’s an investment property, what’s your investment strategy? Will you look for long-term tenants, or will you play the short-term rental game? If so, who will manage the day-to-day operations? The last thing you want to do is have a second home that’s underutilized, which is why making a plan for how you’ll use it before you buy is so crucial.
MSN reported that boomers especially might have regrets about their second home purchases. But with a little preparation and patience, your clients can feel more secure in their second-home purchases and reduce the chances they’ll walk away with buyer’s remorse.
Jonathan Pressman is a Realtor who writes on a wide range of financial topics. Connect with him on LinkedIn and Instagram.
