By: Andrew Rosen, CFP®, CEP®

Growing up at the Jersey shore is a thing I hold close to my heart. I loved being a local “beach dude,” especially when the summers came and the “shoobies” all flooded our little barrier island. There was something nice in knowing you lived in a place so many people went to relax and vacation. There was also a bond between locals, an unspoken brotherhood.

As I’m now an adult living in Pennsylvania, what do I do in the summers? What else but go back to my hometown and try to relive my youth! I want to show my family the wonder that is the Jersey shore and my home.  I want to create new summer memories with my family of, I cringe to say, shoobies.

We recently got back from a week off over the July 4th holiday (my absolute favorite). While I was absorbing the beauty of the shore, I started looking at all the homes for sale and rent. It got me thinking: who buys these homes and who rents them? Then it really got me thinking, despite me trying not to think about work, who should BUY a shore home and who should RENT one?

The Buy Side:

Here are some reasons someone should consider buying a secondary home.

1. You financially can. This one seems obvious, right? I’ve seen too many times where clients purchase that secondary home, but the rest of their financial picture is not clear. I recommend before even considering this option, you work with a financial planner. Have them help you get a good sense of your current financial status. It would be a real shame to purchase a secondary home at the cost of your financial security.

2. You understand it is not an investment. I’ve seen many buy that secondary home and lose money on it. Thus, if you got past question one, heed my warning. Do not look at this as an investment. Be prepared, it’s a financial cost, not a financial gain. That isn’t to say you can’t make money on a secondary home, but don’t go into it with that intent.

3. You plan to use it. By now, we’ve established you can afford this home and are prepared not to make money on it. However, do you plan to use it? I mean really use it? Or, is your life so busy you’ll get there when you can? Take a long look in the mirror before answering. Remember your ROI (return on investment) goes up every time you utilize this property.

4. You are prepared for the upkeep. Homes don’t keep themselves. They take work and energy. Are you prepared for that work and/or do you have that extra energy? Not everyone does. These homes can become a real headache. Go into it with the understanding this is going to be a labor of love.

5. It provides you something renting doesn’t. My Bubby and Zayda (grandmother and grandfather) had a beach house for 33 years. It was a spot my aunts, uncles, and cousins would flock to in the summers. It was a home away from home for my family. We’d gather there for 4th of July cookouts and Sunday brunches. Simply put, it gave us something that wouldn’t have happened if my grandparents rented instead of bought.

The Rent Side:

Now, it’s time to look at the other side of this coin, the rent side.

1. Your finances don’t support it. Remember, these things are costly any way you slice it. Are you saving enough for retirement? Can you part with thousands of dollars a month? If not, do you and your family a favor–rent that house for a few weeks. Maybe try different vacation spots and make that your family’s thing. There are ways to get many of the same benefits more inexpensively.

2. You value simplicity. There is something nice about renting someone else’s home for a week or two. You come in, drop your stuff, and when you are done you no longer have to worry about it. I know a lot of people that even found a place they love and have been renting the same place for years. With the emergence of sites like www.airbnb.com, www.vrbo.come, and www.homeaway.com, it’s really easy to shop for rentals.

3. You won’t utilize it. I run into this all the time. People purchase that beach home then rarely use it, as they find themselves pulled in a million directions each summer. These individuals never get there, yet pay to upkeep it year after year. Don’t let this house become an albatross around your neck.

4. Variety is the spice of life. Are you the type of person that likes going to different places all the time? A particular client comes to mind who embodies this perfectly. They go to Florida for a month or two in the winter, than come home for a little while. Then, it’s off to Mexico to a place they rent there. This couple does it right–for them. They go to the same place every year and have no worry of up keeping three properties.

5. You can get the same experience renting. Renting almost always cost less. If, in addition to costing less, you don’t get something special by purchasing, then rent. Don’t even consider purchasing, as there will be no intrinsic value to doing so. Framing it under that mindset is very helpful as it is often a missed component.

What will you do?

As I day dream about my years down the Jersey shore, I wonder–what will you do? Rent or buy?

Whatever you decide, ask yourselves these questions first. After that come in to see us. We may have another thing or two to say on the matter. Enjoy your summer as I know I’m doing my best to enjoy mine (although still have to convince my friends I’m not a shoobie)!

Financial planning and Investment advisory services offered through Diversified, LLC, a registered investment advisor. Securities offered through Securities Service Network, LLC, Member FINRASIPC .  Some associates of Diversified, LLC are registered representatives of Securities Service Network, LLC, a registered broker/dealer, 9729 Cogdill Road, Knoxville, TN 37932. (800) 264-5499.

Andrew Rosen

In his role as Financial Planner, Andrew forges lifelong relationships with clients. He coaches them through all stages of life and guides them to better achieve their life goals. For more information about Andrew or the other firm partners, Kyle Hill and David Levy, click the link below.

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