A friend likes to bet on games and horse races. But he doesn’t like to be called a gambler.
“I’m a risk manager,” he insists.
In truth, we’re all risk managers – especially those of us who have ever stuck a toe into real estate. When you decide where to live or where to buy, you’re balancing all kinds of risks: personal safety, financial security, quality of life, and more. That goes for second homes, primary residences, investment property and even if you’re renting, not buying. Every decision is a bet.
Looking through the various lists of “best” places to live, it’s interesting to see how different publications or real estate companies weigh the different risks, from crime to the cost of living, to leisure and recreation opportunities. Some of the places that pop up often on those lists include towns like Cary, North Carolina; Irvine, California; Midland, Michigan; Boise, Idaho; Olathe, Kansas; Gilbert, Arizona, and the areas in and around other small to medium cities.
But are you drawn to the notion of living in or outside any of those nice towns? Maybe you’re more into a big city during the week and escaping to a country house on the weekend. Each list has its pros and cons, and is subjective — depending on how you feel, relatively, about the safety, financial security and lifestyle indicators that were weighed, and how they were weighted against each other.
Here’s a discussion of the types of risks we need to consider, evaluate and balance. It’s not a checklist. It’s not advice on where you should live. But maybe this discussion can help clarify your thinking when you are deciding where to make a real estate commitment. It all depends on identifying, defining and evaluating your own individual needs, tastes and tolerance for different types of risk.
Crime & safety
Many people think first about personal safety. Is the neighborhood safe? Is there a lot of crime? The numbers are available for most communities. See how the area you’re considering compares with other areas in terms of not only serious crimes – murder, assault, and robbery, for example – but also relatively minor offenses such as vandalism that can affect the community’s quality of life.
At the same time, if you’re uncomfortable in big cities, statistics showing lower crime rates in many urban areas are unlikely to change the way you feel about investing in suburban, exurban or rural property. In less crowded communities, consider talking to the local law enforcement agency before you make a down payment. How often do patrols pass the home or homes you’re considering? If there was a call, say for an auto accident or a burglary, how long would it take for an officer to be on the scene?
What are the biggest crime problems in the area? What’s the typical officer’s shift like? Are the local cops more like Harry Callahan or Olivia Benson or Barney Fife?
Beyond talking to law enforcement, talk to prospective neighbors. Pretty much everybody has an opinion on local crime and safety, and most people are more than happy to share.
If you are looking for more reassurance, ask around about community watch groups. Some watch groups have a lot to do. Others not so much. My elderly relatives living in a gated senior community in Florida told me they routinely take a weekly four-hour shift driving around in a retired police cruiser; in seven years they have never seen anything remotely involving a crime – unless you count neighbors not cutting their lawns often enough.
Beyond crime, personal safety extends to accident rates. Are some roads known for car crashes? Are some areas more dangerous for cyclists or pedestrians?
If you have health issues or might someday have health issues – which is all of us – find out how long it takes an ambulance to get to the new place. Some friends were starting to look for a second home in a picturesque area of Upstate New York a couple of years ago – until they heard about a wedding where a guest passed out and it took 35 minutes for the paramedics to arrive.
The guest who fainted was fine after a rest and some water, but the friends stopped looking for a country home. “That’s too long to wait if you need help,” they said.
The personal safety and response considerations can be especially important in outdoor settings where you or friends and family might put yourself at risk of injury on a regular basis: lakes and rivers with motorboat traffic, for instance; mountains with skiing; cliffs with rock climbing. How long would it take to get to critical medical care once the ski patrol gets you off the mountain?
Less urgently, financial security is important, too. Too often, buyers fall in love with a house or a neighborhood or an area without considering all the financial red flags. Obviously, you don’t want to buy a place you can’t afford. But you also don’t want to buy a place that costs too much to maintain. Some costs are apparent up front, like taxes. Consider not only the taxes, but travel expenses to and from the place, along with upkeep and maintenance and more hidden costs.
Are you going to work remotely? What will that cost in terms of computers, internet connections and other communications needs? If you’re commuting regularly or working remotely and going into the office part-time, what will that cost?
Are you going to need yard care? A handy person? If you’re escaping to an ocean beach, how often is a storm going to blow sand into your pool? If you’re in a ski area, what will it cost to have someone plow your drive and shovel your roof?
What are the energy costs for heating and cooling? If you’re going to install alternative energy, such as wind, solar or a heat pump, how long will it take to recoup the investment? Is the area prone to electric power outages? Are you going to need a generator or some other backup power source?
Some of us say we’ll never sell our second homes; we’re happy to leave any lingering financial problems to our estate. If you might want to re-sell someday, or you want to save your heirs some headaches, it’s good to pick a property in an area that is growing, or at least that has a reliable turnover of homes with a steady real estate market.
A big financial concern, of course, is insurance for disasters such as floods, wildfires, tornadoes, hurricanes and earthquakes – what insurance we can get, and how much it will cost. We have friends who enjoyed a succession of increasingly nice ocean beach homes over the years – until they realized that they couldn’t protect their mounting losses amid the 100-year storms that seemed to blow in every two to three years.
Thanks to climate change and the increased intensity of storms, it’s difficult to impossible to find affordable insurance for floods and wildfires in some popular second-home areas. Plan ahead for what it will cost you to get insurance, what the insurance will cover – and what it might cost you not to have insurance.
When we got our lake house in the Hudson Valley, we knew we would enjoy living amid a mature forestland. What we didn’t know is how much we would spend on tree care every year, including clearing fallen trees after storms. We also had unanticipated expenses in taking down towering old but diseased oak and beech trees that could have fallen on our house or on our neighbor’s house. Nor did we consider that the potential tree damage would lead us to buy an “umbrella” add-on to our homeowner insurance.
When we don’t think of all the aspects of quality of life when considering a second home, we’re really rolling the dice. Why make a major financial and emotional investment without considering whether there are things that will bother us, or make us regret the choice?
Some Upstate neighbors once told us why they bought their house. “We got drunk on the lake,” they said. They regretted that they didn’t consider, until it was too late, all the other aspects of spending time at their lake house. They still probably would have bought that house, but they would have had their eyes open to the costs and inconveniences that are either hidden or not immediately apparent.
No matter how appealing an area might seem when you rent a place or visit friends, don’t be in a hurry. Real estate agents tell me one of the biggest mistakes for second-home purchasers is to fall in love with an area, and then right away find a house that they absolutely have to buy. Right away. Before anyone else snaps it up.
They jump in without knowing what it would be like to actually live there, even part-time. They sometimes tell themselves they’ll get used to whatever might bother them at first. No doubt, sometimes they do come to appreciate that not-so-good view or the inconvenience of having to make a long drive just to go out for a burger. But sometimes the shortcomings bother them every single day.
Prospective neighbors are a wealth of information
Again, talk to your prospective neighbors before you buy. Tap into the local Facebook group or other social media resources, or the community homeowners association. Go to a meeting if you can. Knock on some doors and introduce yourself. Many future neighbors are happy to chat about what’s great about a community or an area. Ask them what drives them crazy, too, and what they wish they had known before they moved in.
You may love your views and hearing the birds singing out on the deck. But are you the sort of person who will end up constantly wishing you could walk or ride a bike to a cute little coffee shop? Are you okay with long drives for milk or gas or beer? Might the lack of access to public transit keep your friends from visiting? Will you miss yoga and the library and pickleball? Going to shows?
And what about everyday costs that we take for granted in our primary residences? We usually know how much we pay for milk and gas and beer at home, and we often take those costs for granted. But when things we need and want suddenly are a lot harder to get or cost a lot more, it can be a shock- and a daily reminder that things could be better.
Everything about buying a second home is a risk. We all need to be risk managers. We need to think hard about what really matters to us. We need to recognize what we’d really miss if we don’t have it, and how deep we’d be willing to dig into our pockets to diminish the risks and resolve the problems.
We can’t think of everything. But we should think of everything we can.