Would Certainly you rent your winter season residence? If you’re only residing in the residence throughout one period, you’re spending for a vacant home for the remainder of the year.
But before you stuff your suitcases full of sunscreen, here are some questions to help you determine whether your daydream is within your budget.
Would you rent out your winter home? If you’re only living in the home during one season, you’re paying for an empty house for the rest of the year. Opening your doors to renters may make a lot of financial sense, but being a part-time landlord isn’t for everyone.
“Most of my snowbird clients don’t rent,” says Tim McGrath, managing director of Riverpoint Wealth Management in Chicago. “They have someone they know look in on their home or a company come and check on their place,” he says.
Still, renting your winter home can be an effective way to offset some of the mortgage costs, and if your home is in a gated community, your homeowners association may have a system set up to handle the landlord duties.
“You’ll pay more for a home that’s part of a residential community,” says Robyn Jackson, a Miami-based real estate agent with Redfin. She adds that if your homeowners association is handling most of the maintenance and landlord duties, a higher price for your house may be justified.
That said, make sure you can rent your winter home. It may not reside in a tourist magnet. “There’s not a lot of demand for rentals during the summer once you get outside Miami,” Jackson says.
Of course, you may be thinking of moving somewhere like Arizona, Nevada, Alabama, Mississippi, Texas or California – but it’s Florida, especially the state’s southern part, that attracts the most snowbirds. Every winter, Florida becomes home to over a million Americans from colder-climate states and half a million Canadians.
Have you considered taxes? If you love paying property taxes on your home up north, it’s going to be a hoot paying them again on your house in the south. Another thing to consider: If you do your own taxes and practically have a coronary come April 15, this would be a good time to hire a tax preparer. Because those taxes are going to get more complicated.
Especially as the years go on, if you begin making improvements to your winter home or you rent out the property, it’s easy to find yourself overpaying or underpaying your taxes, says Grafton “Cap” Willey, a Providence, Rhode Island-based managing director at CBIZ MHM, a national accounting and professional services provider.
Whatever you do, keep good records on both homes. “One of the biggest mistakes people make after buying a winter home is that they don’t think of keeping track of their records when they put in a new floor, expand the sunroom or put a driveway in. Keep good documents. That always works well with the IRS,” Willey says.
Are you prepared to double some living expenses? You may be able to afford two mortgage payments, but keep in mind that you’ll also have two sets of property taxes, two homeowners insurance policies, two houses to furnish, and if there isn’t a homeowners association to help out, two homes to maintain year-round.
There may also be expenses you simply didn’t have to deal with in your first home. “A lot of the condo fees are higher than people anticipate,” Willey says. “And especially in Florida, people aren’t always prepared for the high cost of flood insurance.”
How well do you know this warm area you’re moving to? Vacationing somewhere is a lot different from actually living there.
If you’re eyeing a winter home in a community with a lot of other snowbirds like you, “look for homes during the peak season, which is December through January,” suggests Bo Mastykaz, another Redfin real estate agent in Miami. “This will help you get a good idea of what traffic is like during the busy season and how busy things are in general.”