Buying a second home is very exciting. In fact, it can be so exciting that people can overlook some of the costs of second home ownership. Wishful thinking often results in serious miscalculations. At the Weybridge Collection we have bought several luxury second homes and understand the process very well. We have developed our fractional home concept called The Weybridge Collection, to provide people with a luxury home experience, yet at a fraction of the cost.Before buying a second home, it is important to realistically figure out just what that second home is going to cost. That way, you avoid the common mistake of finding out you are paying much more than you had anticipated.

Initial Investment

Sometimes people pay for the second home in full and “save” on the burden of a mortgage payment. But that strategy has significant opportunity costs that should be considered. The first opportunity cost is losing your allowable tax deduction on the mortgage interest. The second opportunity cost of the strategy is your lost investment income from other investments you could have made. This cost should also be considered when thinking about the down payment as well. Think carefully about how much investment income you will be foregoing with a large down payment. Of course every financial situation is different, so you’ll need to consult professional advice on your particular situation.

Furniture & Reserve

Furnishing a second home is something people often underestimate, both in terms of cost and effort. This results in one of two outcomes. The first is that people make due with extra furniture they have or find and end up with a decor that isn’t what they imagined. The second outcome is simply that they spend much more than they had anticipated. Not only are larger pieces like beds, dressers, tables sofas, chairs etc. needed, there are also linens, cooking utensils, dinnerware, small appliances, TV’s, DVD players, speakers, etc. Also, keep in mind that many of these things will need to be replaced.

Renovation

Renovating a second home into your perfect second home has romantic appeal. But when choosing a second home, don’t choose a renovation project to try and save money. A small renovation can quickly turn into something bigger, as people often decide to do “just one more thing.” If you are renovating out of the country, it will almost certainly be much more expensive and take longer than expected. There are different customs, laws and the inevitable cultural differences. Overseas renovation can be fun, but don’t underestimate the work involved.

Ongoing Costs

Some obvious costs of owning a second home are mortgage payments, insurance, taxes, and utilities. Make sure you have a handle on what these costs are and if there are any unpleasant increases coming in the future.

Repairs and Maintenance

As in any home, performing repairs and maintenance is a constant chore in a second home. There is always something that needs to be fixed. Usually the repairs and the costs are small, but every now and then something big will need to be done. A furnace will stop, a pipe will break, or the roof will need to be replaced. It is important to set aside a reserve for these things and estimate when the larger expenses will be incurred.

Cleaning

With a second home, using the lowest cost cleaning service isn’t a good idea. As the home will frequently be vacant, it is imperative to find a trustworthy service. And finding a trustworthy, thorough and reliable cleaning service that will cater to your travel whims is more difficult yet. Of course, you could clean your self, but aren’t there other things you’d rather do at your second home?

Cost Per Visit

After you consider all of the costs of a luxury home, you should think about how often you will be using the home. This is usually a sobering exercise for people to go through as they realize how much they are going to pay for how much they are going to use their second home. This is where it is important to consider other ownership structures. Should you rent? Should you own outright or should you participate in a fractional ownership stake? The benefits of fractional ownership are that you still get the benefit of owning a luxury second home, but you share the cost.

The Case for Fractional Ownership

Many people make the mistake of owning a less desirable second home because of the significant costs involved in second home ownership. A wise alternative for many people is fractional home ownership. Fractional home ownership gives you a deeded interest in a home while sharing the costs with a select group of co-owners. Not only is your initial investment much less, but your ongoing annual costs are less too. Also, all the hassles associated with a second home are taken care of and managed by professionals.

Take a look at one of our luxury fractional homes in The Weybridge Collection.