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June 09, 2022 | Financial Planning
Primary residences and second homes can each be leveraged in different ways to help achieve financial goals. One has the potential to be an investment vehicle (generating income while appreciating in value) and the other is simply a lifestyle asset – can you guess which one is which?
Let’s explore the role both primary and secondary residences play in your plan, and what to consider when you’re looking to buy or sell real estate to avoid making financial mistakes.
When building financial plans, our financial advisors consider a client’s primary residence a lifestyle asset, something you use for enjoyment, memories, and utility. It’s not expected to produce income or appreciate similar to other investments. In comparison, non-lifestyle assets are investments and income that support your spending needs.
As we move through life, our living situation changes, children may leave the nest and realize the big house has become more of a burden than a necessity. When making the decision to downsize, there are several factors to consider that may influence your decision.
In theory, downsizing seems like a logical step; however, you should confirm that your finances will benefit from such a move. Real estate taxes, utility bills, normal maintenance, and upkeep costs will help determine when it is a good time to downsize and sell your home.
When it comes to buying a second home, it’s essential to ask, “Is this a smart financial decision?” The following prompts will help walk through what to consider:
Those are just a few things to think about and acknowledge before making the decision to change your primary residence or purchase a second home. Whether it’s a pro/con list, ROI calculation, or cost-benefit analysis, it’s important to evaluate all options and implications.
Buying a new home is an exciting, emotional experience. Be wary of those feelings overriding your long-term goals and interrupting your financial plan. When the time comes and you’re hesitant on your decision, consult with a Financial Advisor for an unbiased perspective on your unique situation.
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