Finance Tips for Snowbirds

To ensure owning a vacation home is as relaxing as you imagined, protect your finances and your assets with advice that’s evergreen.

Rent Before You Buy 

Many people who are scouting a second home are dazzled by a beautiful locale and sign their savings away too quickly. They end up trying to make it back by becoming absentee landlords (which has its own hassles). Take 1-2 years to rent a spot and get to know your neighborhood. When you prioritize your home search, consider:

• Safety
• Noise (Is the home near firehouses, hospitals, bars, or schools?)
• Budget
• Space (What will your home be used for? Will you need room for friends and family or can you downsize?)
• Personality (Don’t be an aspirational shopper by assuming you’ll develop a cheaper lifestyle or new hobbies.)

Map your favorite hot spots and decide whether your new home is comfortable personally and financially. This could be where you live out your retirement.

Prepare Your Homes For All Seasons

It’s important to winterize your home while you’re away, but your tropical getaway will also need routine care. The easiest option is to ask a neighbor or buy a condo or home with a homeowner’s association that will provide exterior maintenance. If you want to maintain your second property yourself, a few summer vacancy precautions include:

• Lawn vegetation
• Mail discontinuation (to deter thieves)
• Water stains or mold that indicate leaks
• Worn roof shingles
• Clogged gutters and downspouts

You could always rent out your vacation home, but revolving tenants will demand their own costs for carpet replacement and repainting. If you rent out your home for more than 14 days, you also have to report it as rental income. 

CALCULATE THE COST

Research How to Lower Your Taxes

Tax codes vary by state. Some have no income tax and provide tax breaks on retirement income and real estate for seniors. To take advantage of the tax benefits available with your new address, here are a few ways to prove your residency:

• Apply for a driver’s license
• Register to vote
• Open a bank account in the area
• Get a new phone number using the area code

You may also need to have a permanent home in the state for 11 months out of the year, and spend 184+ days in-state. Maintain a record of your visitation with plane tickets, credit card bills, etc. Remember, the IRS only investigates if you owe money, not if you pay too much. So make sure you’re not setting yourself up for double taxes.

Plan For Health Care

While most health insurance will cover emergency care out of network, research doctors and hospitals in your new neighborhood that you can reliably afford with your private insurance. You should also fax medical records to a nearby pharmacy so you’re able to refill prescriptions. To make sure you don’t forget important files, such as your medical power of attorney, digitize your documents for easy access from a phone or computer.

Know Fees Involved in Owning a Second Home

Understand that maintenance gets more expensive with two homes, not less. There are ways to cut energy costs, but we’ve provided common expenses that occur when spreading your time across two states:

• Stopping and starting utilities vs. timed, automatic operation (your tropical paradise may need constant air conditioning to avoid mold)
• The commute between homes (gas, tickets, etc.)
• Buying new appliances and furniture vs. a furnished condo or home

As you keep track of these payments, use online banking for bills, and alert your bank of out-of-state charges to avoid them freezing your account. This will make sure traveling back and forth is worth it!