Advertisement
Canada markets open in 3 hours 26 minutes
  • S&P/TSX

    22,107.08
    +194.56 (+0.89%)
     
  • S&P 500

    5,248.49
    +44.91 (+0.86%)
     
  • DOW

    39,760.08
    +477.75 (+1.22%)
     
  • CAD/USD

    0.7348
    -0.0025 (-0.34%)
     
  • CRUDE OIL

    81.88
    +0.53 (+0.65%)
     
  • Bitcoin CAD

    96,040.45
    +726.23 (+0.76%)
     
  • CMC Crypto 200

    885.54
    0.00 (0.00%)
     
  • GOLD FUTURES

    2,217.20
    +4.50 (+0.20%)
     
  • RUSSELL 2000

    2,114.35
    +44.19 (+2.13%)
     
  • 10-Yr Bond

    4.1960
    0.0000 (0.00%)
     
  • NASDAQ futures

    18,473.75
    -30.00 (-0.16%)
     
  • VOLATILITY

    13.02
    +0.24 (+1.88%)
     
  • FTSE

    7,969.92
    +37.94 (+0.48%)
     
  • NIKKEI 225

    40,168.07
    -594.66 (-1.46%)
     
  • CAD/EUR

    0.6816
    +0.0011 (+0.16%)
     

5 Questions to Ask Before Buying a Winter Home

5 Questions to Ask Before Buying a Winter Home

If you have unpleasant memories of polar vortexes, you've probably daydreamed of having a winter home. And if you're retired or your kids are out of school, you may already be planning your escape.

But before you stuff your suitcases full of sunscreen, here are some questions to help you determine whether your daydream is within your budget.

Would you rent out your winter home? If you're only living in the home during one season, you're paying for an empty house for the rest of the year. Opening your doors to renters may make a lot of financial sense, but being a part-time landlord isn't for everyone.

"Most of my snowbird clients don't rent," says Tim McGrath, managing director of Riverpoint Wealth Management in Chicago. "They have someone they know look in on their home or a company come and check on their place," he says.

ADVERTISEMENT

Still, renting your winter home can be an effective way to offset some of the mortgage costs, and if your home is in a gated community, your homeowners association may have a system set up to handle the landlord duties.

"You'll pay more for a home that's part of a residential community," says Robyn Jackson, a Miami-based real estate agent with Redfin. She adds that if your homeowners association is handling most of the maintenance and landlord duties, a higher price for your house may be justified.

That said, make sure you can rent your winter home. It may not reside in a tourist magnet. "There's not a lot of demand for rentals during the summer once you get outside Miami," Jackson says.

Of course, you may be thinking of moving somewhere like Arizona, Nevada, Alabama, Mississippi, Texas or California -- but it's Florida, especially the state's southern part, that attracts the most snowbirds. Every winter, Florida becomes home to over a million Americans from colder-climate states and half a million Canadians.

Have you considered taxes? If you love paying property taxes on your home up north, it's going to be a hoot paying them again on your house in the south. Another thing to consider: If you do your own taxes and practically have a coronary come April 15, this would be a good time to hire a tax preparer. Because those taxes are going to get more complicated.

Especially as the years go on, if you begin making improvements to your winter home or you rent out the property, it's easy to find yourself overpaying or underpaying your taxes, says Grafton "Cap" Willey, a Providence, Rhode Island-based managing director at CBIZ MHM, a national accounting and professional services provider.

Whatever you do, keep good records on both homes. "One of the biggest mistakes people make after buying a winter home is that they don't think of keeping track of their records when they put in a new floor, expand the sunroom or put a driveway in. Keep good documents. That always works well with the IRS," Willey says.

Are you prepared to double some living expenses? You may be able to afford two mortgage payments, but keep in mind that you'll also have two sets of property taxes, two homeowners insurance policies, two houses to furnish, and if there isn't a homeowners association to help out, two homes to maintain year-round.

There may also be expenses you simply didn't have to deal with in your first home. "A lot of the condo fees are higher than people anticipate," Willey says. "And especially in Florida, people aren't always prepared for the high cost of flood insurance."

How well do you know this warm area you're moving to? Vacationing somewhere is a lot different from actually living there.

If you're eyeing a winter home in a community with a lot of other snowbirds like you, "look for homes during the peak season, which is December through January," suggests Bo Mastykaz, another Redfin real estate agent in Miami. "This will help you get a good idea of what traffic is like during the busy season and how busy things are in general."

Have you considered travel costs? You won't just be packing a couple of suitcases. And you won't spend much if you're flying or driving south in December and staying put until February. But if you're leaving in November, will you want to return to see your family at Thanksgiving and then again in December for Christmas or Hanukkah?

"I often encourage my clients to go down wherever they're thinking of buying and rent for a season or two first," McGrath says. "Most people who actually buy a winter home are financially well off, but at lot of times, they don't feel the impact of traveling between two homes and states until they've started doing it."

Of course, these questions may seem designed to convince you not buy a winter home. But living in two homes while feeling cash poor and overextended is likely not your goal, so it's worth considering the less-glamorous aspects of owning two homes. Still, while plenty can go wrong, plenty can go right.

"This is a retirement plan for many of my clients. They want to start building equity in a home now, when they can still get most of the mortgage covered through rental income, and then move to the [winter] home full time in a few years," Jackson says. "Even if your vacation home becomes your permanent residence, you can still rent it out around big golf tournaments and make a lot of money."