Should Snowbirds Rent or Buy Their Second Home?
- 3 times snowbirds should rent
- It’s your first year flying south
- You’re nervous about market volatility
- You’re concerned about upkeep costs
- 3 times snowbirds should buy
- You’re ready to call someplace home
- You’re thinking about your legacy
- You’re able to qualify
- Snowbird home-buying advice
- Get pre-approved before you go
- Find the right real estate agent
- Check if you can rent it out when you’re not there
Anthony: Okay. So first, what is a snowbird? Could you give a quick definition of that?
Janice: Absolutely. See, funny story about this whole topic is I am from Florida. Spent the first half of my life there, and I moved to Pennsylvania. And now, I would like to be a snowbird. So I’ve come full circle to snowbirds. What is it? It is someone who spends their winter in the warmer part. Let’s say, Pennsylvania, in the summer it’s warm, so we stay here. In the winter, it’s cold, it’s dreary, it’s gross. We don’t want to be here, so we go to Florida where we become snowbirds.
Anthony: And there’s a lot of reasons. It’s not just about distaste for the weather, but some people, as they get older, sometimes the dryness of the winter is just like intolerable, so there are many reasons.
Janice: Absolutely. And let’s face it, I mean, the winter in Florida compared to the winter up in the northeast, it’s just much more tolerable.
Anthony: Janice, would you agree that this topic is for maybe our more well-to-do listeners? Because if you have the luxury of thinking of renting or buying a second home, you’re probably doing pretty well. Would you agree?
Janice: I would agree. Yes. Maybe well-to-do, maybe a little farther along in life.
Anthony: Right. Right, with more accumulation of wealth, maybe?
1. 3 times snowbirds should rent
Janice: The first example would be, it’s your first time flying south. Well, this applies, I would think, to anywhere. If it’s your first time going there, you may want to look around. You may want to get to know the area. It’s all about the location. You don’t want to see something online and think, “Oh, it’s a beautiful house in the woods. It’s quiet.” And you get there, and you realize you’re in the middle of a big development. So it may not be the right time to, at first, buy before seeing it, spending a little time there. What do you think?
Anthony: Doesn’t that feel like common sense? I mean, why would you buy something you haven’t ever seen or tried before? It’s a big sink. I mean, unless you’re-
Anthony: With that being said, we have friends who, I don’t know, were living in London or abroad and were moving to New York, and were just like, “Yeah, I’ll take that three million dollar apartment. I don’t need to see it.”
Janice: Well, those are not problems that I can foresee me having in the near future. But, I mean, if you have this problem, that’s pretty cool, I guess, right? You could probably make those on a whim. But when you’re looking at this from a monetary standpoint, you probably don’t want to make such a big investment if you aren’t very familiar with the area.
Janice: The second thing would be, you’re nervous about the market volatility. Some markets are predictable. How quickly could you sell if you needed to? If you’re going into this, and you think you would need to sell quickly, I don’t know if that’s the right tactic either. It might be a better choice to rent, if you’re thinking, “I got to get out quick.” What do you think?
Anthony: I think that’s great advice for almost every type of investment, whether it’s a stock or an investment property or art or anything else that’s not cash, I guess, right?
Janice: Right. I mean, you have to think about it’s not quick to sell a house. You’ve talked about that. You wrote a book about it. This isn’t … It’s not quick.
Anthony: You never want to be a forced seller, yeah.
Janice: Right, right, absolutely. And number three, if you’re concerned about upkeep cost … So home ownership, it costs money. It’s not just the mortgage. You have to factor everything into it, the taxes. If you’re not living there all the time, you’re going to have to have someone take care of it, maintenance, upkeep. So you are, essentially, if you own here or rent here, I say here but, you know, in the northeast, you’re essentially taking on two homes and two upkeep of this home.
Anthony: Yeah, don’t minimize that. I suspect that if it’s your winter home, when you’re there only half or less of the time, all that upkeep cost probably won’t, I guess, annoy you or irk you more than if it’s your primary residence, year-round residence.
Janice: And it could get expensive. Think about it. You cut the grass down there year-round and not just once a week. I mean, you cut often, and you have to keep the grounds good. You have to have someone check on it. I mean, there’s a lot to factor in to make sure that it’s just the right choice.
2. 3 times snowbirds should buy
Janice: So if you’re in that point and that time of life when you’re ready to call someplace home …You have fallen in love with the area. You’ve gone down there. This is the flip side of what we talked about first, if you’ve never seen it. Well, if you go down all the time, and you love this place, and you want to call it your home, and you’re ready, you don’t want to keep all your worldly goods in a car and drive them back and forth, then maybe it’s time. You love it. You keep going.
Anthony: That last thing you mentioned is a great litmus test. If you feel like putting a toothbrush there, maybe you should start thinking about buying [crosstalk 00:06:39].
Janice: Exactly, yeah. You want to leave your stuff and just have it there. That’s you. And you want that to be your home [inaudible 00:06:46]. And then thinking a little more broad, would be thinking about your legacy. So leaving the home to your family … There’s a lot of people that leave, correct me if I’m wrong, but their shore houses, their Florida houses to their family when they leave, as part of their legacy. And it’s also how traditions get started. You know, they go to the shore. So there’s a bigger picture, too.
Anthony: Yeah, a lot of folks like to start creating that family tradition, maybe, of going to the, like you said, shore house or down to Florida at the winter’s end. It’s not just about owning an asset but, rather, creating something that, an experience, I guess, that can be passed on from generation to generation.
Janice: Absolutely. So you’re … Not only the piece of property but everything that goes with it and the traditions. And then, lastly, you’re able to qualify. That’s a big one. You probably can’t start this … We both know, and you’ve talked about it in your book. You can’t start this process until you know you can qualify, because buying a home, there’s financials involved with it. And you should know that you’re in a financial place that you can carry the mortgage and everything we talked about before, the homeownership that goes with it. You should be in a good spot. And if you’re able to, it’ll be a great time.
Anthony: Yeah, we talk about not buying too much house to the point where it’s just stressing you out or burdening you. And to me it would be even sillier to do that for a second home. So make sure it’s well within your means.
3. Snowbird home-buying advice
Janice: So the first step in any home buying process, is the pre-approval. Have your finances in order.
Janice: But this is pretty particular in this case because, let’s say you just drive down there and you’re like, “Okay, I want to buy a home.” Well, that’s great. But that’s not your main place where you spend all your time, your financial documents aren’t necessarily going to be with you. So you want to make sure you have all your ducks in a row, per se, before you fly south, because you will have access to more of your information.
Anthony: Also, pre-approval, there might be some little local twists. For example, I mean, I know New York City is not where people come for the winter, but I’m just giving you an example of a local twist. The way it works in Manhattan is, oftentimes there are certain buildings, like on a building by building basis, that banks will or will not lend to, right?
Anthony: So let’s say that this building has, I don’t know, their financials are not up to the standards of Bank of America but Chase is okay with them, right? I’m just giving an example. This is the kind of stuff you need to know, locally, before you start doing all your paperwork and underwriting with one bank, only to find out that that bank doesn’t lend for that building. I mean, that would be huge waste of time on everyone’s part.
Anthony: So that’s the sort of stuff. I can’t think of an example off the top of my head for Florida and Arizona or what have you. But there may very well be circumstances like that.
Janice: Well, there are a lot of the, down there at the retirement condominiums, they’re almost like its own town in and of itself. So there may be differences when it comes to that, with the pre-approval taking it all into consideration.
Janice: But, yeah, just start looking into it before you go. And you’re not down there that long, really. The snowbird … Oh, I wish I had the numbers, but I think of it, it’s really in the cold parts. So you’re not there for more than, what would you say, a few months?
Anthony: Two, three months, max, yes.
Janice: Yeah, so if you take care of this before you go down, you’re way ahead of the game. And just as importantly, finding the right real estate agent. So there are lots of great real estate agents in Florida that specialize in snowbird properties. As you can imagine, an awful lot of people do this. And that’s their … And not necessarily that any of the real estate agents couldn’t handle it, but there are specialties.
Anthony: I mean, it’s so important. If it’s not your neighborhood, there are so many things you might miss, overlook, or just not know about, you might not even know to ask about. And a great broker’ll really guide you through that process, especially if you are a snowbird. And they’re familiar with and even questioning [inaudible 00:11:05] of snowbirds, they can probably answer questions you didn’t even think to ask. So yeah, a really great agent can be a real ace in the hole.
Janice: Absolutely. And they will be able to answer questions. For example, and the last part here is to check if you can rent it out when you’re not there. And we’ve talked about, you know, shore homes. Those rent, depending on where you are. But it might be different where you’re going in Florida. It might be in a condominium or a retirement community where you can’t rent. So you have to factor all that in.
Janice: If you were trying to look at the rent as an income factor for you, but you buy a house that you can’t rent, that’s going to be a problem. So you’re going to want to look at all that. But if you have the right real estate agent, they’ll guide you through that.
Anthony: Yeah, and also look into whether or not there’s management companies or … I think in some areas, condos actually manage that for you. There are a lot of moving parts involved when you’re letting other folks … I guess maybe not these days because of Airbnb and whatnot. But, you know, yeah, just make sure it’s going to work out the way you’d like it to.
Janice: Right, right, make sure it’s … And, you know, also look at the homeowners’… Some homeowners’ associations, they don’t allow rentals. So it’s definitely want to take all into consideration. And a good real estate agent can help you.