Home Sweet Home(s): How to Live in Two Residences Affordably

Tips on how to avoid risk and wasting money when living in two places.

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Paul Sisolak
With the winter snowbird season soon upon us, many people will be flocking to their vacation residences, abandoning their primary households until it’s time to do the same for their off-season places of respite.

It’s a great privilege having the opportunity and variety of splitting time between two locations. And it’s nice to dream of having such an arrangement, though sometimes, we don’t consider that managing two residences is a precarious balance that takes hard work, scrupulous property management and added expenses that can leave homeowners in the red if not handled right.

If you’re considering buying a temporary vacation home, or if you’re recently retired and don’t want to leave family, a permanent summer home may be for you. But before signing off on a new mortgage, consider some of these tips on how to afford a second property, and how to avoid risk and wasting money when living in two places.

Examine Your Finances

Buying a second residence while keeping your primary home is a big financial decision. Ask yourself some of the same questions you posed when purchasing your current home:

  • If my mortgage is paid off, can I afford a cash-only purchase?
  • Are all my ancillary debts (auto loans, tuition, etc.) fulfilled?
  • Am I happy with the location where I’m looking to buy?
  • Experts recommend the cash-only route as your best option. It's not recommended to take out a second mortgage on your primary home because the payments can't be deducted as personal mortgage interest. If you begin paying a separate mortgage on a new property, there's another conundrum: It's not tax deductible.

    If that's only a small price to pay, and you decide to go the mortgage route, the good news is that you've done this before. Crunch the numbers and don't overborrow. MarketWatch advises that if a second home brings your annual debt payments to more than 36 percent of your take-home pay, you've bitten off more than you can pay.

    The Case for Renting vs. Buying

    If you've decided on a secondary home, another big consideration is deciding whether to rent, buy or both (buy and rent your home in the off season). There are some tax breaks that can offset certain costs that come with maintaining dual residences.

    1. To buy. Blogger Susan Quilty puts it best: "Owning two homes means you will have two sets of bills, and two sets of belongings. You will have to pay for two sets of utilities, two home insurance policies and two sets of property taxes," she wrote on the blog 55places.com. Is it worth double the financial trouble? Yes, if you live in wintry Chicago and consider the freedom of calling a Palm Beach winter home worth it. Your house is yours and yours alone. There is no searching for hotel rooms come each vacation and no hassle of dealing with time shares. It's yours, so you can visit any time you please, and for as long as you like – not when the season dictates.

    2. To rent. Some people find having a primary residence in one fixed location is enough – they don't want to be held back by another wintertime house in one location. If that's you, then a long-term vacation rental might be worth it. There are no mortgage payments, maintenance responsibilities or taxes to pay; leave those to your landlord. Just pay the rent for the time you reside while you and your nomadic spirit ponder where to visit next season.

    3. To buy and rent. That winter residence gets awfully lonesome (and expensive) sitting there empty the rest of the year. This time, you get to be the resident part of the year and landlord for the other. However, remember this is your investment – and your home – so choose wisely who you lease your property to. Tenants are meant to defray, not contribute, to the expenses that come from owning a home. Also be mindful that while this is your home, you must be respectful of your tenant's lease – that means you have to work your vacation schedule around theirs, not the other way around. There's also good news on the tax front if you rent your place out. For your vacation home to qualify for residence tax deductions, you'll need to spend at least two weeks there or 10 percent of the time the property is rented for.

    Managing Your Investment

    Yes, your vacation home is no less a financial investment than your longtime residence, so it needs upkeep while you're not there. Employing the services of professional cleaners and landscapers will preserve the beauty of your home year-round – your Realtor should be a good reference for who to contact. And you can deduct up to $25,000 – as long as your gross income is less than $100,000 – if you play an active part in managing your property.

    So, if you've been dreaming of a second place to call home, but have hesitated to turn that dream into reality, don't worry. There are plenty of ways to buy a home and save money at the same time. Whether you declare a house, condo or boat as your second residence, you may not be able to live in two places at once, but you can still look forward to one thing – the choice of living where you want, when you want.

    Paul Sisolak writes for GoBankingRates.com, a source for best mortgage rates, CD rates, savings account rates, personal finance news and more.