What to Do With Two Houses

One of the great things about falling in love is being able to share your life with someone. You can make plans together, face challenges as a team, and pool your resources to create a better life. One potential problem that may arise with this new situation can be two people wanting to move in together – but both are homeowners.

Figuring out what to do with a second home probably qualifies as a luxury problem, but nonetheless, doing it right can be challenging. The good news is you’ve got good options.

Sell, Sell, Sell

If you’re moving in with someone and you’ve both decided that it’s your house that should be sold, you’ve got a lot to think about.

The real estate market is unpredictable, to put it mildly, and you’re probably wondering if now is a good time to sell. The answer will depend on where you live. According to one forecast, only four of the top 25 metro markets will see an uptick in real estate growth this year, while the other 21 will continue to decline. Declining home sales and real estate activity is good news for buyers, but bad news for sellers. That’s going to give many homeowners pause.

If you need to dump the house because it’s too costly to keep, however, then selling – even if you’re not going to see much of a profit (or any at all) in such a weak market – might be your best course of action. If your only choice is between losing money and breaking even, the latter is clearly the way to go. Keeping your second home as an investment property will probably mean you need to rent it.

Rent, Rent, Rent

Owning a second home – one where you don’t live or vacation in – is usually afforded by renting it out. How else are you going to make the mortgage payments on it?

While it makes sense in theory, of course, renting your second home and becoming a landlord comes with a whole lot of challenges and potential problems. Tenants might not be as desirable as you thought they’d be, for example, or they may lose their jobs and be forced to move out – leaving you holding the monthly rental bill.

Additionally, the rental market is extremely weak these days, with no clear indications that it’s going to get better any time soon.

If you want to keep your second home as an investment property, but aren’t getting a lot of bites from potential renters, one idea might be to simply focus on breaking even for the next year and charging just enough rent to cover the mortgage, with no profit. If the rent doesn’t quite cover the mortgage, kick in the rest. You’re spending some money out of pocket but in the end you’ll be hanging on to your second home. When times get better you could be making much more money when you sell.

Vacation, Vacation, Vacation

Another way to retain your second home and make money from it is to rent it to people on vacation. The vacation rental market is booming, and if you live in a place that sees a lot of tourism you could be sitting on a serious cash cow. By listing your home on such sites as Vrbo.com or HomeAway.com, you’re making it available to people on a nightly basis.

A two-bedroom Los Angeles-area home that sleeps four, for example, could be rented out for $300 a night. That’s going to be very tempting for families that are traveling on a budget. While places like Los Angeles and New York City will always see a lot of tourist demand, other places won’t, or will only be seasonal. In these instances it could still work out to your advantage to rent your second home as a vacation rental if there are enough “good times” to subsidize the bad – meaning, your summer income gets you through the sparse winter months.

Being a homeowner is hard right now, given the grim economy and extremely troubled real estate market. Many people have seen their homes lose significant value, and foreclosures continue to mount. Given that, it’s not an opportune time to be faced with selling or renting a second home – but real estate cycles come and go, and if you hold on to your second home you could be in for the kind of payoff that makes all the stress well worth it.