Published July 2004

If buying a second home, make sure you’ll use it

About every April when the weather warms up, I have this burning desire to buy a convertible. It has happened so many years in a row now that I know exactly what I’d buy: a two-door ’63 Chevy Impala, probably red, maybe white.

I’ve even gone to classic car shows and talked shop with car buffs just to see if maybe a deal might float my way. I haven’t really thought through how I’d spring it on my wife, but that’s a bridge I figure I’ll cover when I get there.

So far, I haven’t bought one. Usually, the kids’ tuition or some other logical thought process kicks in, leaving me to wallow in my midlife crisis for another year.

In a similar Pavlovian way, it seems summer is the time of year people talk about buying a vacation home. Maybe it’s a beach property, in a golf-course community, Chelan or the San Juans? Something to fully enjoy the summer sun.

Whether it’s the weather or some other reason, it’s worth taking some time to review the opportunities and pitfalls of buying a second home.

Historically, the results have been mixed on how vacation or second homes work out financially. Everything from “Oh, that money pit?” as a friend of mine says whenever I ask him if he’s headed to his place in the San Juans to “best decision I ever made” from an associate who stretched to buy a cabin on Whidbey while his kids were still young enough to enjoy it.

There are any number of ways to go about getting into that second-home lifestyle. Some offer tax advantages as a bonus. But it’s safe to say that a second home is rarely a solid cash-flow play the same way buying a rental would be.

To begin with, by definition, they are rarely located where they can be used by people commuting to work, which reduces the potential for gaining off-season rental income to defray your costs.

Consider Camano Island, however, as an example of a local second-home market that is flourishing. The half dozen or so quality beach and view communities on Camano are a perfect fit for those looking to recreate, but close enough to commute to work or even to open up the possibility of renting it in the off-season to defray costs.

As a Realtor working the Camano market recently told me, “Camano properties get used,” contrasting that market with perhaps more distant vacation and second-home markets with which she competes. “No ferries, no mountain passes,” she quips in her pitch.

No matter where you land, the point is, it’s best to make sure you buy a second home you will use. This seems to be a consistent theme among Realtors who work in these second-home markets. Otherwise, it’s just an investment, and your assumptions and expectations should fit the investment profile, not the second-home profile. The risk-and-return quotient is different.

To that end, perhaps the biggest pitfall second-home buyers make in evaluating their own use is that they overlook travel time considerations. Or they miscalculate their own schedule limitations.

How many times have you heard someone refer to their second home as a place they would like to get to more often?

Whatever direction you go, if you’re considering a second home this summer, it’s a good idea to close your eyes and imagine the home on a dark and rainy January day and ask yourself these questions:

Who will check the pipes then? Will you use it then? Who will maybe rent it in the off-season? Will you really use it as much as you think? How will you feel about the mortgage payment when you’re still months away from summer weather?

Your answers to these questions will likely determine if you’re ready or if you should throw the second-home urge in with the ’63 Chevy convertible and let it well up next year for another try.

Tom Hoban is CEO of Everett-based Coast Real Estate Services, a property management and real estate advisory company specializing in multi-family and commercial investment properties. He can be contacted by phone at 425-339-3638 or send e-mail to tomhoban@coastmgt.com.

Back to the top/July 2004 Main Menu