Should You Buy Your ‘Second Home’ First?
What comes to mind when you hear the phrase ‘second home’?
For me, growing up in a town called Hicksville (I know, I know), that was a phrase reserved only for the wealthy. It meant something unattainable—something that people like me didn’t have… couldn’t have. If we overheard someone talking about their lake house or beach cottage, we’d roll our eyes and mutter a sarcastic “must be nice.”
As I’ve gotten older, I’ve really come to hate that phrase—must be nice. “Must be nice” assumes luck. Handouts. Privilege. A certain set of circumstances for people different than me. At it’s worst, it’s a permission slip for laziness, a built-in excuse to never try in the first place.
But realistically, most people who have achieved something interesting or acquired something impressive didn’t do so by chance. They worked hard. They made sacrifices. They got creative.
Ironically, many people who are quick to dismiss success with a “must be nice” never stop to ask the one question that could change everything: How did you do it?
You, dear reader, are not one of those people. You have subscribed to this newsletter because you saw something that intrigued you. Something that made you wonder if there was another way. And I’m excited to tell you, there is!
Maybe you live in an expensive city and owning a home, any home, feels like a pipe dream. Maybe you’re looking to build wealth in a way that’s more exciting than watching a stock ticker rise and fall. Or maybe, like me, you just want to own a vacation home—a place to escape to with family and friends, somewhere to create unforgettable memories—and you aren’t sure how you could possibly afford it. Either way, you saw something that piqued your interest, and rather than brushing it off with a must be nice you said: Tell me how. And that’s exactly what this newsletter is intended to do.
Redefining the American dream
For so long, the ‘American Dream’ has been defined as owning your own home. And there’s a ton of merit to that desire. Nothing is more important than safety, security and family, and owning your home feels like you're living life on your terms. Throughout my adult life, I have always lived in big cities (NYC and London), renting 7 different apartments over the course of 16 years, including my current home. Twice I was forced to move out, not by choice of my own—one landlord was selling, one was tired of dealing with a cranky neighbor. I, too, prefer the idea of a home that no one can take away from me—well, aside from maybe the bank.
But a recent Bankrate study showed that renting is now more affordable than buying in all 50 of the largest U.S. metros. My current New York City apartment is proof of that. Let’s take a look:
A real life NYC example
We currently pay $3,995 a month for a 2 bed, 2 bath duplex, 1600 sq. ft. apartment with an oversized basement that doubles as a bedroom and a playroom (and an office… and a workout space… and a laundry room… and a podcast studio—this is NYC after all, the king of dual purpose spaces!). Whether that feels expensive or cheap, let’s look at what a comparable space would sell for.
Zillow currently shows the lowest price for a similar footprint in my neighborhood as $925,000. Truthfully, that price is if you found a screamin’ deal and didn’t mind doing a LOT of renovating, but let’s go with it to see how it compares to my rent:
To put 20% down, I would need $185,000. If I had great credit and my lender was open to a smaller downpayment (as little as 5% - 10%), that amount could be reduced to between $46,250 and $92,500.
For a purchase price of $925,000, Bank of America calculates closing costs to be approximately $36,746.
Now for the monthly payment. With 20% down, we’re looking at $5,758 per month—that's $1,763 more than my rent, or $21,156 more annually.
When you drop the down payment to 5%, that monthly payment increases to $7,252! That would be $3,297 a month more than what I’m paying to rent, or $39,084 per year!
Plus, as a homeowner, you have the joy and financial burden of household repairs. One commonly cited rule is to set aside 1% of your home's purchase price annually for maintenance and repairs—in this case: $9,250. For renters, that cost is borne by the landlord.
So let’s look at how the numbers break down:
Wow. In that first year, between laying out the down payment and covering the closing costs, you could be spending as much as a quarter of a million dollars MORE than just paying rent.
But isn’t renting just “throwing away” money?
Ah, the age old argument. I get it. Part of that astronomical mortgage payment every month is going towards paying down your principal, actively building you equity in the asset you’re living in. And that’s wonderful! But with the numbers above, most people—including myself—are left with two options:
Downsize to something more affordable
Move someplace less expensive
Honestly, those options suck. For myself, with two children, downsizing much more wouldn’t really be feasible. (See above slash-slash list of all the dual-purposes my space is already serving.) Not to mention, there are a million different reasons why people can’t move—or don’t want to.
And this is where the idea of buying your 'second home' first comes in…
Another Way
My husband and I were moving back to New York after spending six years living abroad in London. Unfortunately, my mother is very sick, and we needed to come home to be closer to her. Returning to NYC, now as parents to a toddler, left us with a lot of questions: Would we still like living here? Is this a place we’d want to stay long-term? And even if the answer to both was yes, the reality was, we couldn’t afford to buy here. We had saved some money for a down payment, but nowhere near the $130k - $250k range demonstrated above. For us, the math wasn’t mathing, so we decided to rent an apartment, giving us flexibility to pivot in the future, and bought our ‘second home’ near Lake George in upstate New York.
Nicknamed the “Queen of American Lakes,” Lake George is a sentimental place to us. Early in our relationship, we camped there every summer with our dog, grilling three meals a day, sleeping in a tent, and enjoying the simple pleasures of the outdoors. But at some point during each trip, inevitably missing the indulgence of a hot shower and electricity, I always thought, wouldn’t it be nice to own a house here someday?
We found a property (pictured above) in Warren County, where the median sold price was in the $300k range—a stark contrast to Manhattan’s median of $1.3 million! I planned to list the property on Airbnb and Vrbo, hoping that when we weren’t there, rental income could help offset some of my costs. What happened next shocked me.
Not only did we cover all of our annual costs—we actually turned a profit!
It felt like a lightbulb moment. Friends and family thought we were crazy—you’re going to buy a place but not live in it!? was a common refrain we heard. But the numbers didn’t lie. I felt like I had tripped into the best investment strategy, one that helped me build wealth for the future, without sacrificing enjoyment today.
I see it as similar to a retirement account… that is, if your 401(k) came with a fire pit and a lake view!
Owning a ‘second home’ offers the long-term financial upside of traditional investments—growing in value, building equity and even providing income—but with two major differences:
My mortgage is paid by short-term renters, not by my own contributions;
And when it’s not booked, I get to enjoy my vacation home now, not someday in the future. It’s a place where I can escape the chaos of city life and reconnect with loved ones. What 401(k) can do that?
Like what you read today? Have a question? Just want to say hi? I’d love to hear from you. Email me at Hello@BuyYourSecondHomeFirst.com or message me on social media @BuyYourSecondHomeFirst. I personally read and respond to every single note.
*The content shared on Second Home First is for educational and informational purposes only. Please consult a licensed financial advisor before making any investment or financial decisions.