By Lee Sherman
It’s an appealing prospect. What if you could live half your life in the north or eastern part of the country and the other half in the south or west, escaping the bitter cold and snow for sunny climes? That’s what snowbirds do and you can join them. But owning two homes or eventually retiring to where you vacation has definite financial considerations that you need to be aware of. So, before you decide to fly south for the winter, take advantage of these tips.
Decide Where to Nest
Vacationing is one thing. Establishing a different permanent residence is another. Not only do you want to make sure that the destination is one where you enjoy being, but you’ll also need to think about the more mundane aspects of everyday life. Can you get proper medical care including access to your prescriptions? Don’t forget about health care insurance. You’ll need to make sure the local doctors are covered by your plan. How easy is it to get around? Is there a large snowbird community that can provide the social interaction you need?
If you are going to spend half the year as a snowbird, you’re most likely better off owning a home than renting or staying in a hotel or Airbnb (that can be prohibitively expensive). Buying a second home is much the same as buying any home, with the same financial considerations. Depending on your financial situation, you’ll need to make the buy vs lease decision on that second property. Becoming a snowbird is a bigger commitment than you might realize at first, so it might be a good idea to lease at first, while you are deciding. Keep in mind the need to take out a mortgage and pay taxes on that second home. You’ll also need to pay for two of everything you own.
You may be able to offset some of the cost of the second home by renting it out when you’re not there. But there are several potential problems with this scenario. The most desirable time to be in the home is most likely when you want to be there yourself, so if you’re renting it out, that takes away from your ability to enjoy the advantages of owning a second home. You’ll also need to consider the cost of liability insurance and maintenance fees.
From Nest to Nest Egg
Once you’ve decided whether to make a home your permanent residence (or domicile) you’ll run into additional tax and legal considerations that can affect your estate planning, if done carefully, for the better. Tax laws vary from state to state of course but you can avoid much of the hassle and cost by working with an attorney to title the property in a living trust or an LLC. If you have the wherewithal to invest in a second home, in a desirable location, that is likely to increase in value, you aren’t only finding a place to enjoy your sunset years, you’re also providing a sunnier outlook for your heirs.
Lee Sherman is a contributing writer to MyPerfectFinancialAdvisor, the premier matchmaker between investors and advisors. Lee is an experienced journalist and editor with over 30 years of expertise with a significant history of writing in the personal finance and technology arenas.