Create, track and manage your vacation home finances.

Your primary household budget is probably the part of your financial life that you are most aware of. Your primary mortgage, car payments, tuition payments, and other bills are probably fairly familiar to you. You may even have a well-developed system for tracking your monthly budget and know how to adjust as needed. Are you as aware of the expenses involved in owning your second home?

When you consider purchasing a second home, whether as an investment or as a vacation home, it’s easy to think only in terms of the cost of the home itself along with, perhaps, utilities and furnishings. However, it is just as important to put together a cohesive plan and budget for your second home in order to ensure that you can keep track of costs, prepare for unforeseen expenses, and optimize its value over time.

Many of our clients create a separate bank account just for the second home expenses (and revenue if it’s a rental). This makes it easy to see cash flow & track tax write offs. Second Home Care sends one monthly invoice and you can look at the whole years expenses as you do your taxes. It ends up being really convenient to have it all under one partner company!

Creating a second home budget and plan

When putting together a budget for your second home, it’s important to think through all of the various expenses associated with it. These will differ in some ways from your everyday, primary home expenses, while in other ways they will feel very much the same. They include:

If you are carrying a mortgage on your second home, you are probably most familiar with this line item in your budget. If you paid cash for your second home, you will need to keep track of taxes and insurance payments, which are generally due every six months.

These include any needed repairs as well as ongoing maintenance items like pest control, defensible space and yard care, snow shoveling and removal, maid services, and any other ways you take care of your property on a regular basis.

Utilities include electricity, water, gas, and sewer, as well as cable or satellite television, internet access, trash removal, and other ongoing operational costs.

Most property management companies work off of Revenue Share — typically between 20-40% of all rental revenue collected for your property PLUS cleaning, maintenance & other fees. Newer companies like Evolve charge 10% — but strictly handle the marketing and rental contracts while you’ll need to handle local access, maintenance and cleaning. Second Home Care is different. We have monthly programs that are fit to your needs with ZERO REVENUE SHARE. If you rent, you keep your profit. If you don’t rent, you get Pro Level Property Management customized for second home owners. This will allow you to make more money from your rental and/or cover your expenses while renting less. With SHC, the choice is yours!

Almost all the local neighborhoods have HOAs. Some are pricey (Northstar’s Ritz Carlton has expenses over $6k monthly last we checked) and some are much lower. Tahoe Donner HOA expenses of around $2k per year are a bargain if you use the amenities. If your home is located in a condominium, you will pay fees above and beyond the neighborhood HOA - this may be a seperate HOA or expense structure to cover common area asset improvements and maintenance, and in Truckee these expenses can be high!

Tahoe Donner, Northstar, Old Greenwood, Gray’s Crossing and other HOAs with clubs may have membership buy in fees up front monthly fees in addition to charges associated with the use of the club or resort facilities and services.

You may choose to have a dedicated vehicle for your alpine home. Many clients keep an SUV or Subaru in the garage - often ready to go with snow tires and sometimes we put them on a battery trickle charger. You will need to budget for the vehicle along with maintenance, insurance, and other associated expenses.

You may also keep a variety of recreational vehicles and gear at your vacation home. In this case, you’ll budget not just for the acquisition of these items, but for the maintenance, upkeep, and storage. The basics (ski / bike / kayak gear) are easy but if you have dirt bikes or snowmobiles we can discuss battery upkeep and security with you as needed.

This includes items like furnishings, linens, food, alcohol, and any other expenses you incur. Rentals or pure second homes, it’s great to have multiple sets of linens and now with Covid-19, multiple duvets or comforters. That makes cleaning them more efficient and effective. We can discuss how to accomplish this with you.

To make it your home, and as comfortable as possible, it’s a good idea to duplicatesome “stuff” in your second home. For example, a separate wardrobe, duplicate skin care and makeup, hair care products and appliances, children’s books and toys all make a quick trip less of a hassle. You will want to budget for these.

Tracking your budget

Once you have gathered all of the information and determined how much you’re spending for every aspect of your second home, it’s time to begin tracking your budget. This will help ensure that you are always planning ahead and are aware when expenses change.

Create line items for each of your expenses, along with a place to record miscellaneous or unexpected expenses as they occur. Create columns where you can track expenses monthly, quarterly and annually, ultimately calculating the overall total for each item, each category, and the house as a whole.

The first year or two, you will probably be trying to determine what your expenses will be. Once you have tracked them in your spreadsheet, however, you will have a fairly predictable budget that you rely on with only small adjustments from time to time.

Explore potential revenue lines

If you are thinking of using your second home as an investment property or are currently offering the space as a short-term rental, you will want to record your income on your spreadsheet, as well. Don’t forget to deduct the amount of revenue share you’ll need to pay a typical property management company. This will help you better determine how cost-effective your management is, how profitable the property is, and what you can do to make it more profitable.

In some cases, you may find that better marketing leads to fewer vacancies, allowing you to keep your home filled more often. You may also find that you are not charging the market value for your property rental. A survey of the market may help you adjust your price upwards in order to bring in more income and better meet expenses.

And of course consider using Second Home Care to eliminate the revenue share and increase your flow through to the bottom line!

Build an emergency / major repair fund

It is always a good idea to expect the unexpected, so be sure to include an emergency and major repair fund in your budget. This will cover unexpected damages, weather-related damage, appliance or system repairs or replacements, and other hard-to-predict expenses.

With proactive inspections, like those provided by Second Home Care, you will have an even better idea of how much to set aside for future repairs. Top-notch management can also help you guard against the unexpected, by ensuring proper property oversight.

Whatever your reasons for purchasing a second home, we’re here to ensure you feel good about it. Talk to us about your property management needs and let us help you plan ahead for all of the months and years to come.

Jonathan Luster