5 Steps Clients Should Take Before Buying a Second Home

Buying a second home is an exciting goal for many people, whether it’s a beach condo, mountain cabin, city apartment, or a launching pad for European travel. While it’s fun to dream with our clients, owning a second property adds layers of financial complexity financial advisors should consider. Here are five important steps to take before biting the bullet on a second home.

What I’m Telling My Clients

1. Start with a Clear Vision

Before you model the math, understand the why behind your goal. Ask yourself whether you’re looking for a vacation home to enjoy with your family and friends or an income stream from a rental property. It may sound odd to think about selling a property before you even buy it, but the success of your long-term financial plan and tax strategy can depend on whether you sell the property during your lifetime or pass it through your estate. Each scenario creates a different financial and operational picture, so clarity at this point will be important.

2. Plan for a Larger Down Payment

Second homes often require more cash upfront than primary residences. In the U.S., lenders often require a 20%-25% down payment for a vacation home or rental property. When considering a purchase abroad, you may see a down payment requirement of 30% or more. Research the lender’s or the local government’s requirements to guide savings goal-setting.

3. Prepare for Furnishing Costs

A second home often needs to be fully furnished from scratch. I encourage clients to budget $30,000-$70,000, depending on their taste and the size of the property. You will not just need furniture; you will also need to stock the kitchen, basic housewares, linens, decor, electronics, and outdoor items. This expense should be modeled into the plan to occur in the same year as the home purchase.

4. Model All Ongoing Costs

A second home introduces a new category of recurring expenses that vary widely based on location, climate, and property type. Additionally, if the property is farther away or rented, a property management or maintenance contract may be considered. Be sure to account for ongoing costs such as travel and transportation, routine maintenance and repairs, utilities and other services, and any HOA dues or building fees.

5. Stress-Test the Purchase

A second home may conflict with your financial plan’s existing priorities. You may be able to cover the expenses, but consider whether it will reduce your ability to fund education expenses, retire on time, or make improvements to your primary residence. Reviewing this purchase and priorities in the context of the full plan is important.

The Bottom Line

A second home can add joy, comfort, and meaningful memories, but only if it aligns with a client’s financial reality and long-term priorities. By clarifying the property’s purpose, modeling real-world costs, preparing for higher cash needs, and stress-testing the financial plan, we can help our clients make this decision confidently and thoughtfully.