The Cons

Well, with a few final days of summer left at the Jersey shore I’ve been doing a bit of thinking.  Just last night was talking to a gentleman on his electric scooter scoping out an open house.  We got to talking and started going through the benefits and perils of owning a beach home (second home).  It wasn’t the first time I’ve had this conversation, of course, as summer seems to be a beacon of people wanting to purchase that vacation home.  That said, it seemed timely to write a blog about it from my perspective.

Negatives:

There are plenty of positives to owning that second home, but let me start with the negatives that I’ve both seen and lived.

Costs– The extra costs are the glaringly obvious negative.  It is two mortgage payments, two down payments, and basically two of everything.  Now, I find most people are prepared for the down payment as that is obvious.  They are also prepared for the increased mortgage outlay, as that is easy to tabulate.  Here is what I find a lot of people don’t factor in.  You will have two hot water heaters that will break, two lawns to service, two sets of pots and pans, and two sets of little things always needing fixing.  Do you ever feel like you are always spending money unexpectedly on your home?  Well, times that by two and it can certainly feel like death by 1,000 cuts.

Obligations- Owning a second home comes with a big obligation and expectation.  Do you want to spend every weekend at the beach in the summer?  Or would you prefer to do a few weekends here and there, while still doing family vacations?  How about the off-season, are you fine leaving a property unused for 8 plus months?  Will you feel like you have to give up other plans you’d rather do, simply because you have to get to your second home?  I’ve heard many individuals sell their second homes for these unexpected stressors.  If you have a lot on your plate may not want all the hassle that comes with home number two.

Upkeep– Forget the costs, for a minute, of maintaining two homes and think about the efforts.  You will constantly be cleaning and maintaining two homes as they constantly need work.  You’ll have to winterize it or summerize it.  You will have to water plants and garden in two places.  It is energy and effort, to say the least.

Opportunity Cost- This is a tricky one and not overly intuitive at first glance.  But owning a second home brings with it lost opportunity cost.  What do I mean?  Well, assuming there is an end to your financial resources, let me explain.  The costs for this home will most certainly be taken away from something else in your life.  Now, some are fortunate that they have enough assets that they can have their cake and eat it too.  However, most of us have finite resources.  So, the question to ask yourself is would you rather spend money on a second home or spend money on the items buying that second home will preclude you from doing?  That could be family vacations, camps, and even college for your kids.

Usage– Finally, when purchasing a second home it is critical to think about usage.  I can’t tell you how many times I see people sell a beautiful beach home because they simply didn’t use it as much as they thought.  That can very often come with a ton of sunk costs.  There are costs to buy and to sell that you’ll never recoup.  At the end of the day, a lot of people would be better off going nuts renting a few weeks here or there and essentially paying for the exact amount of usage they plan to consume.

Debbie Downer

I totally hate sounding like a Debbie Downer on owning a second home, especially since I have one.  That said, I have to lay out both sides of the equation so you can formulate your own decision.  I’d hate for someone to spend gobs of money without understanding all sides of the equation.  So, buyer beware and hopefully, this has given you a little bit more to consider before taking the plunge.

Next up Part 2!  As always stay wealthy, healthy, and happy.

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