Sometimes, when you buy a second home, you can’t sell the first. Here’s how to cope.
Until recently, Paul and Kelly were quite happy at their home in Sanford, Manitoba. They took care of their three foster children and ran their natural beauty business.
Then the house next to Paul’s old family cottage in Kenora, Ont., went up for sale.
It was everything they needed: a cottage-style house fit to raise the children and 160 acres to continue farming for their business. When, in future, they choose to wind down the company, they’d be retiring in a beautiful area with services nearby in town.
So, they picked up their life in Sanford and plunked it down 250 kilometres away. There was just one problem.
“We were stuck with two properties,” says Paul.
They never intended to own two homes. They expected the Sanford home to sell quickly, but months had dragged on and they were still paying for a house they weren’t even using.
It’s an unfortunate reality that Myles McInnes, Associate Consultant at Investors Group Financial Services Inc., sees when some people buy a second property. It can be scary and feel like a financial disaster that will impact your finances for years. But there are ways to cope.
How doubling up happens
A new job out of town, the sudden need to be near family or, often, the discovery of the perfect new house — for retirement, or just a change of scenery — can entice people to purchase without a plan.
“It’s easy to get excited and jump at the opportunity to buy,” says Myles.
He says that the market is extremely competitive right now, making it tempting to get caught in a bidding war and overpay. When you buy in a hot market but try to sell in a less desired location, you may read the market wrong. The old family backsplit or bungalow may be in competition with hip new townhouses. And if you’re already got your new home, you may not have the time or money to fix the fence, paint the place and pay for a stager.
Do some planning
When clients start looking to move, Myles suggests they slow down and do some serious calculations. Many think they can float two homes, either short or long term, if they have enough money for a down payment. They don’t consider the extra monthly mortgage payments, the maintenance costs, and the general upkeep. He suggests they ask how the purchase will affect their retirement plans and if they can survive in the worst case scenario, such as the former home doesn’t sell.
If you’re currently the proud owner of two homes, think about some clever work-arounds. After a month with their old home on the market and no serious bites, Paul and Kelly decided to try their luck renting it out on Airbnb. To their surprise, bookings started coming in. It’s even given them ideas for the Kenora cottage, like renting out self-made yurts in the home’s backyard forest.
Renting out a former home long term might also work. Consider putting it back on the market in the fall or spring when there are more buyers and adjust the price to match the local market. Invest in a stager who will ensure the place looks appealing for your target buyer.
It’s better to avoid become a two-home owner if that wasn’t the plan. But with smart strategies, you can get past it and look ahead to a more financially stable future.