Ways of financing a second home (Snowbirding)

[timemoveson]

The annual costs of ownership of our winter home in Florida is $12,000, capital improvements aside. This is what friends pay to rent a similar home for three months in the winter. Zillow claims our home appreciated over 20% in the last thirty days. I can board an airline with my computer bag alone because every thing I need is already there. Count me as a happy second home owner.

With due respect, I would point out that:

- you can't leave the capital improvement costs and hassles "aside" in thinking about the numbers;
- your property may or may not appreciate in value and Florida quite obviously has had it's turn on both sides of that coin;
- your capital is tied up in that property and consuming your wealth that could be deployed elsewhere.

I have fairly extensive personal and investment real estate experience now, and currently own two expensive fully paid for personal use properties which we enjoy a lot. We have perhaps profited above inflation due to our location in and near a major world capital city after all costs have been properly considered. However, we have also concluded that overall, over time, returns on personal use real estate basically track to the long term inflation rate. This means you have to really want it, and that is perfectly ok if you can afford it long term; it is not, IMO, an economic advantage to own over renting. It really is a wash when all costs and missed opportunities are considered properly.

 

[Floridatennisplayer]

It's an interesting game for sure. Renting vs owning. So many variables come into play. My parents have owned a condo in SW Florida for the past 30 years. Still do. So many wonderful memories we have made. Can't put a price on that! Our kids grew up going to Ft Myers every year since they were babies. We watched videos of them in Florida over our break.

Now our kids are in their early 30's we are in our early 60's. ...and go down to our condo all the time. I wouldn't have it any other way. We bought our condo 3 years ago. Fortunately able to pay cash. We have a close friend who rents it for 3 months and it covers all of my expenses.....taxes and condo fees and insurance ...for the entire year.

I will retire in 2 years and expect to spend January thru mid April down there then. Then the costs will be back on me! Yikes! Might fly back once for a 10 day stay to see my grand kids or have them shipped to us! That will be the hardest part.

 

[socca]

The annual costs of ownership of our winter home in Florida is $12,000, capital improvements aside. This is what friends pay to rent a similar home for three months in the winter. Zillow claims our home appreciated over 20% in the last thirty days. I can board an airline with my computer bag alone because every thing I need is already there. Count me as a happy second home owner.

• the owners in my Dad's FL condo complex (a 2nd home for him) were hit with a $27k per unit assessment to pay for a new roof (clay barrel tile) a few years ago. The tiles are surprisingly lightweight and fragile. They do look nice, as you'd expect for that price. The owners argued over the new roof, and half of the owners stopped speaking to the other half.

• Zillow claims that my house is worth almost 3 times more than I paid for it two years ago. A couple of months ago, Zillow's RE valuation algorithm started malfunctioning. Truth is, it's probably worth 10-15% more.

 

[Spanky]

• the owners in my Dad's FL condo complex (a 2nd home for him) were hit with a $27k per unit assessment to pay for a new roof (clay barrel tile) a few years ago.

Cha-Ching! Cha-Ching! for the Condo Association.

 

[ivinsfan]

Cha-Ching! Cha-Ching! for the Condo Association.

What do you mean? If there wasn't enough money to pay for reroofing an assessment is what happens. This is one of the pitfalls of owners who don't want their HOA fee raised to cover increasing costs.

Are you trying to say the board members personally profited from this levy, otherwise I find your comment confusing.

 

[Ronstar]

What do you mean? If there wasn't enough money to pay for reroofing an assessment is what happens. This is one of the pitfalls of owners who don't want their HOA fee raised to cover increasing costs.

Are you trying to say the board members personally profited from this levy, otherwise I find your comment confusing.

Don't HOA board members get salaries similar to megacorp board directors?

 

[ivinsfan]

Don't HOA board members get salaries similar to megacorp board directors?

Well I understood they actually get paid large amounts of B#$ching and Moaning, with a side of whining thrown in for free.

 

[Hdhead]

We own a second home in Florida. Honestly, would not have considered it unless I could buy with cash, which we did. Bought in 2011 (I was 57 years old) when market was beat up and now has appreciated over 50%. So it has obviously been a decent investment that we can actual enjoy. Very liquid if ever needed. Be sure to add up all the carrying costs then add 20%. For us tax, HOA, pool maintence, power, internet, tv, insurance (not cheap), another car (we keep there). I figure $15,000 annually. We very much enjoy it and would do it again.

 

[Meadbh]

Don't HOA board members get salaries similar to megacorp board directors?

Nada. Unless a special resolution is passed.

 

[socca]

I figure $15,000 annually.

This is consistent with my Dad's annual cost for a 2200 sq ft condo (2 BR 2 BA with den 2 car garage in a duplex). Market value $300k.

 

[Hdhead]

This is consistent with my Dad's annual cost for a 2200 sq ft condo (2 BR 2 BA with den 2 car garage in a duplex). Market value $300k.

Yup, mine has a $350k market value.

 

[Spanky]

What do you mean? If there wasn't enough money to pay for reroofing an assessment is what happens. This is one of the pitfalls of owners who don't want their HOA fee raised to cover increasing costs.

Are you trying to say the board members personally profited from this levy, otherwise I find your comment confusing.

Does $27K for roof replacement sound reasonable for each unit in a condo? Unless the size of each unit is large (e.g., 3,000 sq. ft) and the building has only one or two levels, the cost seems very high.

 

[socca]

Does $27K for roof replacement sound reasonable for each unit in a condo? Unless the size of each unit is large (e.g., 3,000 sq. ft) and the building has only one or two levels, the cost seems very high.

• 8 duplexes in the condo association (not many units to spread the cost over)
• all one-story
• each unit around 2200 sq ft
• fancy high-end tile

The condo association was originally going to assess $41k per unit until my Dad stepped in and found a 'cheaper' quote. Still too rich for my blood.

 

[ivinsfan]

Does $27K for roof replacement sound reasonable for each unit in a condo? Unless the size of each unit is large (e.g., 3,000 sq. ft) and the building has only one or two levels, the cost seems very high.

Well don't forget all common areas would need to be re-roofed as well, and perhaps new flashing and/ or repairs on the roof itself .I had a relative that had a roof levy that included other maintenance items. I just think calling it a rip-off when you don't know the details is premature. Now in timeshare developments they are notorious for hiring "relatives" giving them 6 figure salaries and squandering the fees. Basically draining the place dry. On a board that is comprised of owners of single family units, I guess that wouldn't happen as much.

 

[Hdhead]

Does $27K for roof replacement sound reasonable for each unit in a condo? Unless the size of each unit is large (e.g., 3,000 sq. ft) and the building has only one or two levels, the cost seems very high.

Florida tile roofs are pricey. Mine is single family 2450sqft one story that cost 25k to reroof. Requires a sealed sub-roof under the tiles, then the tiles have to be cemented into place to pass hurricane force removal test required after placement. At least that is a Palm Beach county regulation.

 

[Spanky]

Socca & ivinsfan,
Thanks for the additional info. Single level condos could be quite expensive to maintain.

 

[Golden sunsets]

We've looked at buying a second house but always come back to renting being the cheaper/easier option. Consider the yearly costs of owning another house. Often times it is the same or cheaper to just rent a house or condo for the 4 or so months you may use it. Then you keep the down payment, etc. and don't have any maintenance issues.
Also when renting you can go different places as your desires change. Or health, etc.

This has been our approach. I think there have been analyses on this forum on the number of months that you snowbird dictating whether it makes financial sense to own vs rent. I know the OP does not want to debate that issue, but renting solves his issues regarding financing as well as his wife's desire not to downsize. We snowbird for two months a year at this point. Same location, same unit every year. Lot's of friends and continuity and the advantage of avoiding the headaches of maintaining a second home remotely.


Sent from my iPad using Early Retirement Forum

 

[45th Birthday]

We own a second home in Florida. Honestly, would not have considered it unless I could buy with cash, which we did. Bought in 2011 (I was 57 years old) when market was beat up and now has appreciated over 50%. So it has obviously been a decent investment that we can actual enjoy. Very liquid if ever needed. Be sure to add up all the carrying costs then add 20%. For us tax, HOA, pool maintence, power, internet, tv, insurance (not cheap), another car (we keep there). I figure $15,000 annually. We very much enjoy it and would do it again.

Very liquid if it's in a big place with lots of turnover perhaps. We have what was originally a second home, now an unneeded third home, on the market. Has been for sale for 1 1/2 years. Seasonal market with not much supply, but also limited demand due to the high prices. Could cut the price $250K and get an offer probably, but will wait a bit more through another season. No mortgage on it, so the only costs are opportunity cost the funds, insurance, taxes, etc. in that order. Not too worried because current list price is 2.6 times what we paid for it 20 years ago and we will have to pay a huge capital gains tax when we sell.

 

[JP.mpls]

Meadbh,
I agree that "unreasonable" was a poor choice of words to describe the association fees tied to condos and townhomes. Utilities and maintenance costs are necessary part of owning a property.


I personally still prefer having a single family home with no association. I can do as much of the maintenance labor as I choose, and make all of the financial decisions regarding repairs and updates.


JP