As the summer begins to wind down, you may hear clients lament about the end of the season and the impending cooler weather. The changing of the seasons may even get them thinking about purchasing a second home, either in a warmer location for the cold months or at a nearby shore town to use in the summers.
It’s a wonderful thought, especially for those who are retired and have the ability to split their time between two homes. Who wouldn’t want to enjoy an endless summer? But the real question here is, does buying a second home make sense for your client?
Before they start packing their bags, ask your clients three questions:
1. Can you afford a second house financially?
This question sounds like it could be an easy one to answer. Run the numbers, determine a budget, etc. But really this question is about cost—what will it entail to maintain two houses in two locations? That’s double the mortgage, double the utilities, double the maintenance, double the taxes…you get the idea. Maybe the answer is still yes, but the follow-up question in this category would be, can one of you afford these costs on your own, should something happen to the other? When one spouse passes away, that doesn’t mean that home expenses are reduced by 50%.
2. Can you afford a second house physically?
This question doesn’t pertain to moving or setting up a new home—it calls to attention the upkeep involved in owning a home. As you age, you likely become less agile and mobile, so what happens when the pilot light goes out on a water heater? What happens when the gutters get clogged? What about landscaping needs? Exterior repairs? Plumbing issues? Hard-to-reach lightbulbs burning out? Many beach homes are built on stilts; will you be able to walk up and down stairs carrying groceries? It may be the case that you can no longer DIY such home maintenance dilemmas, and if your second home is far from family, you may not be able to rely on children or grandchildren to lend a hand. Aging in a dream vacation home may bring a smile to your face, but won’t that joy be diminished if you wind up not being able to enjoy it?
3. Can you afford a second house socially?
In retirement, having a social network in place can be important to your mental health and overall well-being. If you split your time, or maybe even relocate completely, it is important to consider what that will mean for your social life. Who will you golf with? Who will you go out to eat with? Who will you have over for drinks? Starting over from scratch in this arena could be quite difficult, and quite lonely. It can also be costly—in an effort to avoid isolation, you might want to join a golf club, find a gym, take classes, or participate in organized group outing. All of that costs money. It might be an aspect that is often overlooked, but the social side of a second home can wind up being a hit to your mental health and your wallet.
When talking to clients about a second home or a relocation, it’s never fun to be a buzzkill. However, it is a decision that should not be taken lightly, and it is a financial advisor’s responsibility to counsel their clients through such a drastic choice. It’s a very tempting scenario, but not one that makes sense for everyone.