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How About a Second Home?

Many retirees are drawn to the idea of a second home--  a concept that extends well beyond providing a vacation spot-- but there’s much to contemplate before such a purchase.  


I think one of the most important things to consider is an old axiom of mine:  It’s not what you own; it’s what you control.  We can look at a couple of interesting super-high-end properties currently available for rent here in Southern California to illustrate what I mean by that.


The first is 6436 Camino De La Costa in La Jolla.  It’s currently available to rent for $85,000 a month, which on the surface might seem absurd.  But that’s what your mortgage payment would be for (just) a $15 million home while there’s another beachfront house just a mile away that’s listed for $26.8 million-- that would cost more like $140,000 a month along with a $5 million down payment. 


My buddy, realtor Stuart Vetterick in Beverly Hills, currently has a rental listing in Malibu at 21606 Pacific Coast Highway for $65,000 a month.  But the property is probably worth upwards of $16 million, which would imply monthly costs over $90k. 


The decision to rent or buy depends on whether you want to own a second home as an investment, or control one by renting.  I don’t necessarily think buyers in the current market are going to get curb-stomped on the value of a new residential real estate purchase; I’m just saying the monthly nut is a lot bigger when purchasing, all to enjoy the same thing.


There are, of course, many other considerations.  For example, depending on how much time high-end renters from out-of-state plan on spending in the area, they’d probably prefer not to establish residence in California where taxes are likely higher than wherever they’re coming from.


Moreover, renting might be part of a family’s risk management strategy, by maintaining better diversification and investing the extra money in financial assets as opposed to a residential property;  the typical family office recommendation is for 20% of one’s assets to be in real estate. Plus, renters can get various tax write-offs, like for a home office. 

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When it comes to buying a second home, we all know that location matters. Selecting the optimal location for a second home is a decision that can mold the entirety of your retirement experience. The choices may seem endless-- from the tranquility of serene beaches to the invigorating embrace of crisp mountain air or the dynamic energy of vibrant city life. It’s not merely a geographical decision but a lifestyle choice that influences the day-to-day rhythm of your retirement.


Practical considerations will add another layer of significance. As you research, keep in mind the travel logistics to and from the chosen location, especially if you have family members dispersed across different regions. Remembering this will ensure that your retreat remains an accessible haven for shared moments with loved ones. …Nobody wants to live on an island if nobody can get to the island.


Additionally, proximity to health care facilities takes on heightened importance during retirement. Securing a seamless connection to medical services provides both peace of mind and the assurance of prompt assistance when needed.


In essence, the right location transcends its point on the map--  it becomes an integral part of crafting a retirement that harmonizes your personal preferences, practical considerations and your overall well-being.

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Accurately calculating costs is important to determine a realistic budget for the acquisition of a second home. This step is not merely a formality but rather a vital cornerstone to your home-buying process, requiring thoughtful consideration of all the ongoing expenses associated with owning any given property.


Beyond the initial purchase, the financial blueprint must factor in recurring obligations like property taxes and homeowners’ association fees, and you should also really drill down on the impact of local taxes on your investment portfolio.


The significance of comprehensive property and casualty insurance coverage for a second home cannot be overstated.  This robust insurance shield acts as a bulwark against a spectrum of potential risks, extending far beyond mere structural damage. It encompasses the safeguarding of personal belongings and protection against liability issues, so it fortifies the overall resilience of your investment, especially if you’re not there all the time.

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Second homes in retirement offer a unique blend of adventure and stability. Careful consideration of location, wealth planning and understanding the importance of property insurance helps align your investment and lifestyle goals. When redefining notions of leisure and exploring new possibilities, the second home option certainly emerges as a compelling avenue for creating lasting memories and securing a comfortable and fulfilling retirement. By navigating the allure and considerations of second homes, retirees can embark on a journey that blends the excitement of adventure with the tranquility of a well-planned retirement.


As with any major financial investment or wealth planning decision, contact us for guidance and support.








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