A Second Home
Pleasure? Investment? Think It Through
Boomers considering purchasing a home away from home may want to start the process by asking why they want to buy it, say financial planners.
As it happens, many consumers are asking that question and arriving at a suitable answer.
The number of annual second home purchases rose to 359,000 units in 2001 compared with 264,000 units in 1991, according to a survey released by the National Association of Realtors, Washington. The survey, covering the period between 1999 and 2001, found that approximately 6% of all annual home sales were second homes.
If someone wants a second home, the first step is to ask “why do you want one and what is the purpose?” says Sean Seabold, a certified financial planner with Sebold Capital, Naperville, Ill. As a general proposition, “every asset needs to have a purpose.”
The first order of business, say planners contacted by National Underwriter, is to decide whether the property is a vacation home or an investment property.
Planners should encourage boomer clients to think about how a second home fits into their lifestyle, if indeed, it does, they say.
Making sense of a second home purchase is both a lifestyle and money decision, they add, and the first step is to see if it makes sense given the boomers life and family.
For instance, Seabold says that if a boomer has a high-stress job, then a getaway home may make sense. But, if it takes hours to get to the residence, the person also has to weigh that cost since “time is a very big asset,” Seabold continues. A boomer needs to “own assets but not have assets that own them.”
And, if the client travels a lot, a vacation home may not make as much sense as it would for someone with a more stationary job, he says.
If the property is going to be used as an investment and rented out, Seabold encourages having a professional manage it.
If someone has a friend manage the property, that person runs the risk of having him or her become less of a friend, he adds.