Is a Michigan Cottage or Florida Condo Better?

Today, we'll be answering the question, is it better to have a Michigan cottage or a Florida condo? Hello and welcome to Money Talks. My name is Ken Wink from Summit Financial Consulting. If you like our show today, please like and subscribe. If you'd like to check out old shows, you can go to our website, summitfc.net, go to the podcast page and check out all those old shows. You can also subscribe on Apple Podcasts, Spotify, or Amazon Music. So today we'll be discussing if you're going to get a second home, vacation home, fun home, is it better to buy a place up north in Michigan or Minnesota, or is it better to buy a condo in Florida? We get asked this all the time, especially from people who they're thinking about, oh gosh, I've been renting a place in Florida for a, for, for a few years now, um. Maybe should I buy a place and then I can rent it out to people? So we're going to dive into purchase prices, property taxes, homeowners insurance costs, lifestyle differences between the two places, and so much more. Before we jump in, let me introduce my co-host, Tony. Tony, have you ever had to rent a place before? I bet you were an absolutely perfect tenant. Yeah.

Oh, I'm a pretty good tenant. Yeah, of course I've rented. I mean, back in my 20s, I rented many apartments and I've done Airbnbs with the family. I don't own a second home or condo. I have, you know why I don't own a condo in Florida? Why? Because I have friends who own a timeshare or a condo in Florida. They have a condo in Destin and they've offered it. I haven't actually been there yet. They just got it a year ago or late last year. So they're like, you and Sarah can use it anytime. And we're like, yes, please. Thank you. Yeah. Yeah, it's good to have friends who have timeshares or Airbnbs in nice locations. But, yeah, I mean, you know, I'm from Minnesota, and it's really popular to own a lake home or cabin up north, right? Yeah. In the, you know, we call it the North Shore, up by Superior, Duluth, or Boundary Waters, two harbors toward Canada. And, of course, the UP, a lot of even Minnesota people, da-upers, da-upers, da-UP. A lot of people from my home state of Minnesota actually have places, either in northern Wisconsin or the UP. And so I'm sure you have clients or people you work with and people in your area, you know, that have places up in the UP, right, that they go to?

Yep. Yeah. Northern Michigan, you know, Minnesota is the land of what? Ten thousand lakes.

And yeah, actually, there's eleven thousand two hundred lakes that are larger than I forget what it is a mile square. I mean, like decent sized lakes. We're not talking about they don't include ponds to get that number. People think, oh, they say ten thousand lakes just to be funny. No, it's actually more than that. And they're big lakes. Yeah.

Yeah. Yeah. So Michigan's surrounded by water, you know, shoreline all the way around. So yeah, tons of clients have places up north, but also tons of clients have places down in Florida. Yes.

Condos in Florida are popular, right? Yep. Yep. Destin's a popular one. I know Sanibel Island, all over, right?

Yeah. Absolutely. Yep.

Yeah. So how do you choose? Which is better? Michigan cottage up in the UP or a condo down in Florida?

Are you going to tell us? Or even northern Michigan? Like there's places an hour north of Detroit here in what we would call the thumb of Michigan. Oh, yeah. The thumb. The mitten with the thumb. Yeah. Yeah. So before we jump into money, let's just talk lifestyle. Oh, yeah. You know, if you do a Michigan cottage, it's going to be about lakes and boating and fishing and campfires and maybe family get togethers because people can just drive there. Right. Instead of flying might make it a little bit easier. And then also four seasons. Right. Michigan has all four seasons and tons of Michigan families have just decades of memories at family cottages that get passed down from generation to generation. Yes. Florida condo, different experience. You know, you got warm weather completely year round, although it may be too hot during the summer or too many bugs, you know, depends on where you're at.

July and August get a little humid down there, buddy. Get a little balmy. Yeah, it gets a little like a sauna down there in the late summer.

Yeah. Yeah. So, I mean, you can golf year round beaches, obviously, and swimming a lot of restaurants, depending upon what touristy area you're in. And then, you know, just snowbird living, you know, being able to leave the cold and get away from the cold Midwest winters. Right.

Get away from that lake effect. Michigan seems to suffer from or the subzero temps that Minnesota experiences during the winter. Exactly.

So so that's sort of it. You know, you have to ask yourself. How do you want to spend your time? Because even if it's the best investment decision in the world, you know, it won't be a great purchase if you don't enjoy it. Right. Right.

Yeah. And I think people spend a weekend or maybe even five days in Florida and they're like, this is great because they're there at a peak season or they're doing something fun or they've never they haven't been there that much. And then they say, let's buy a place. It's like you need to probably spend some time, especially if you're thinking about moving there. So many people I know from Michigan and our area have moved to get away from winters and weather to Florida and end up moving back. You probably know some of those people, right?

We do. Yeah, absolutely. Yeah, it's... There's so many things to consider. In our experience with Florida, a lot of times if people are financially tight, they will say, I'm gonna buy this place down in Florida and then I'm gonna rent it out when I'm not using it. The problem with that is the time of year where everyone wants to rent the place, which is after the holidays typically and before summer hits, that's when you would wanna use it too. It's sort of self-defeating, you know, to not be able to use it at the times that you actually want to use it. And then, yeah, when it's maybe a little bit too hot, balmy, buggy during the summer, then nobody wants to rent it probably.

Plus you're a landlord and you probably have to pay a service to, you know, administer that unless you're really good at it and have the time. And want to put in the time and effort. But if you're not down there, what if it needs repaired? Hey, the electricity went out or the water heater went out. I mean, people don't calculate those costs. They think they're going to help pay for it by renting it. But that doesn't always work out, does it?

No, and I mean, you really run into the same problem in Michigan. Michigan's got a short summer, and unless it's someplace that works for skiing and snowmobiling, you're probably only going to rent it out during the summer, in which case this is when you would want to use it. So the same kind of problems, you know, something breaks, now you got to drive two, three, four, five hours to go up there and start fixing stuff. And then those places, it's a... you know, one or two hour drive to a home Depot to get the stuff that you need. If you're in the middle of a pro who hasn't done a project and they have to run back to the hardware store, you know?

Yeah. Let's not get started on my screened in porch. I built for the catio. I probably made 200 trips to the Lowe's and Menards, uh, home Depot, uh, Yeah, that's spoken like a true man. Yeah, that's me for sure. Right. So there are a lot of things to consider, you know, and so what about price? You know, that's got to be one thing people look at. What does a condo in Florida cost versus what does a lake home or someplace nice and cottage in Michigan cost?

Yeah, I did some research right now in northern Michigan, so I didn't dig into the UP too deep because... Duh, youpers. Yeah, we're just, for this example, going to look at northern Michigan.

Well, yeah, it's a little further. The UP is a little further away. It's a little dry, yeah.

Yeah. Yeah. So we looked at Traverse City, Petoskey, Torch Lake, Higgins Lake, all these popular places. Yeah. Traverse City. Even I've been there. That's beautiful. Yeah. Yeah, absolutely. So the prices were surprisingly similar, Tony. So we found lakefront or I should say waterfront properties from $300,000 all the way up to over a million dollars. Well, sure. Yeah. when we were looking at Florida condos, it was basically the same range, 250, $300,000 up to over a million, just depending upon how close you are to the ocean and the amenities in the area, how touristy it is. So yeah, that was my first surprising takeaway is the purchase prices were very, very similar. But when we start looking at the ongoing ownership costs, that's where things can be dramatically different. And I think that's where a lot of people get surprised.

That's where the rubber meets the road, really. And I'm glad we're going to go into this. I assume you have some numbers for us and have looked into this because, yeah, I was surprised and I know people I know have been surprised by this.

Yeah, so with Michigan, it was surprising how much more expensive the property taxes were if you're right on the water. So if you're willing to go away from the water and have to travel a little bit to get to the water, that helps. But the range in property taxes were anywhere between $3,000 to $12,000 per year after doing my research. So it was nice and predictable what the property tax structures were going to be. Florida, on the other hand, property taxes were actually lower than I expected, at least when it came to condos. Property taxes for condos were between $2,000 and $8,000. So in some cases, but again, we are including the Traverse Cities and Petoskey's. These are really... There's a lot of people that travel over from Chicago and pay big bucks for these places and property taxes can get high.

But can you imagine on a cottage or a place you don't use year round paying $12,000 a year in property tax?

Yeah, there's some bougie wealthy places.

That doesn't include your mortgage payment on the place or your home insurance, your property insurance. But property taxes, you have to have homeowner's insurance on top of that. But $12,000 a year to be on the water in Traverse City, that's rough, isn't it?

Yes, it is.

You have to have more money than cents at that point. Exactly. And some people do. I'm not going to name names, Ken Wink, but some people don't even balk at $12,000 a year. That's a lot of money.

No, that's real money even to you, Ken. That's real money. So getting insurance, homeowners insurance, that's where we started to really see a big difference. So the Midwest is delightfully boring when it comes to natural disasters. Every once in a while, there's a tornado. Every once in a while, there's a flood. But for the most part, there's not a lot going on. It's not like... You know, Texas, where they unexpectedly get snow and the entire power grid gets into trouble and all the windmills freeze up and are damaged. It's not like South Carolina, where there's occasionally really bad flooding. Or, of course, Florida, where there is flooding and hurricanes and all sorts of different weather conditions. things that can happen. So yeah, the homeowner's insurance in Michigan, it was like a thousand to three thousand dollars, and it gets more if you've got waterfront exposure and how far you are from fire services and how old the building is and how the roof is and all those kinds of things, but Yeah, Florida, we are regularly seeing over $5,000 even for condo insurance. And then if you actually have a standalone house, it can get really, really sort of out of control.

Yeah. So condo insurance, maybe on the really cheap side, $1,000, but $5,000 annually for insurance in Florida is crazy for a condo. And then like a glorified apartment, you're paying five grand for insurance.

I mean- Right. Yeah. And then in some cases, there's an HOA where they're charging for the community for upkeep of a community pool, maybe landscaping, those sorts of things. And sometimes they also have their own insurance on the building. So then that would tack on up and above your insurance.

Well, yeah, I'm glad you brought up HOAs because I do know in Florida that even sometimes when you buy a home, a lot of these places, especially the senior living places, but condos, there's always HOAs or association fees, right? And you're not typically going to have those at all. Those would be zero on a cottage in Michigan, typically. Yeah.

Right. But, you know, sometimes that HOA is worth it a little bit because if you have a Michigan cottage and my parents have a place on Lake Huron and Oscoda. Oh, nice. Yeah. And yeah, it's like just trying to get somebody to cut the lawn, snow removal, the spring cleanup after all the fall cleanup.

Good point. I never thought of that. So that's all taken care of at a Florida condo. And your HOA fees might cover some things like that, obviously. But if you own your own cottage, it's all on you to do the maintenance and upkeep, isn't it?

Yep. And then, you know, septic systems like a lot of these places don't have city plumbing. So you got to get your own water from a well and then purify the water after it comes out of the well and then worry about the septic system. You don't want those backing up tree removal. So there are some some costs that you got to figure out when it comes to a Michigan cottage, too, and sort of keep an eye out for that. But yeah, there's in some cases in Florida, monthly HOA fees as high as $1,500 per month. We did see as low as $300 per month, but this is where the rubber absolutely meets the road. And the problem with the HOA costs is that an unexpected weather event could happen. And now all of a sudden, you know, maybe the HOA costs are reasonable when you first move in, but if something unexpected happens... You know, now the HOA could either do a special assessment to handle a one time roof replacement or, you know, just you got to sort of expect the unexpected.

Like your property taxes. They can go. They can and will go up. Yes, I've learned. Yes. Yeah. I mean, my property taxes have tripled in the last 10 years, 15 years.

on my regular home.

I mean, I don't own a second home, but on my house, they've tripled. So, yeah.

Well, imagine if you moved, right? Because then they reset, like in Michigan, they put a max on how much your property taxes can increase. But if you move, then it sets the new fair market value of your home. So that's where you can get hit a little bit. Yep. But yeah, the special assessments are one thing I really want to overemphasize to people is that there's been special assessments that we've seen clients get. It's over a $10,000 bill from an HOA. Oh, my gosh. Repairs that are needed for this or that in a condo association. That's crazy. Yeah.

Wow. Yeah. Yeah. That's not good.

Just have an extra, you know, ten to fifty thousand dollars sitting around in case you need it, Tony, for in case you just want to give it to your HOA.

They just say, oh, by the way, we want I know it's normally five hundred a month. We're going to also need a check for ten grand this month.

It has happened.

So that's, that's, yeah, that's not good. Uh, I, I never, I didn't ever, I've never been part of an HOA. So I did not know that the special assessment thing, I just assumed if some bad, if they needed a new roof insurance or they had to cover it, that's why they charged, got money every month. So that's crazy. Special assessments. Uh, that's not, those are dirty words now. Uh, that's not good. Uh, Yeah. You might want to look closely at the HOA contractor that you're becoming a part of. Right. And see what they can and can't do.

Go, go meet your potential neighbors, you know, go knock on some doors when you're down there.

Say, Hey, how much out of pocket are you spending here?

Yeah.

Yeah.

Yeah. So we did, you know, so, you know, we already sort of touched on the weather risk. Like there is weather risk in Michigan, too. There's snow and ice and freezing pipes and storms and sometimes floods. Obviously, Florida has hurricanes and flooding. And there's also saltwater corrosion in Florida. We went a couple of years ago to California. Airbnb on spring break with my family. And, you know, from the pictures, the place just looked amazing. But once we got there, my son, Jack, walked in and just said, oh, my gosh, this place is crusty and dusty. And it was it was a nice place, but there was just a lot of saltwater corrosion placed down there.

Yeah, that's something a lot of people don't think about. You definitely want to make sure you look closely at the place you're getting before you make any decisions. But you missed something on the cons to Florida. I think we have to address probably the biggest con is gators, alligators.

That's true.

If you want to golf in Florida, a lot of people say, I want to be able to golf year round. So I'm moving to Florida. Avoid the waterways because there's gators and you might come home to your condo and there's an alligator in your tub. It's Florida. I mean, they're just there in your tub, you know, sloshing around, enjoying it. Yeah. Yeah. Yeah. You got to be careful. Yeah. I won't tell it today, but I have a funny alligator story from a trip house sitting in Florida with a friend. I took their little dog on a walk and they live, their house backs up to the water and they have a whole screened in pool in the back, but it's all walled off and screened in and it screens. But I took the dog out and there's a strip of grass running around the lake. So I took the little dog, I guess I will tell the story and I'm walking and all of a sudden off the slant down to the water. clamp. It almost got the dog. And I saw it coming up and I jerked the thing. The dog flew in the air. I literally pulled the dog off the ground into the air and ran. And Tom, my neighbor who I went down there with, who's lived in Florida, he said, what are you doing? Get out of here. Don't walk back there with the dog. And It wasn't a huge gator, but that was as close as I've come to an alligator. And watching the house, the dog we were sitting almost got eaten. So that's right. That's Florida. That's a Florida for you.

That's a free pass for small children to Florida. Not near water. If there's water, there's an alligator.

That was near Sarasota where that happened. But yes, saltwater corrosion. I wouldn't have thought of that one. Alligators.

Just generally speaking, I always recommend. So there's there's a lot of people out there that have timeshares. and there's a lot of people that they got older or their things are a little bit tight for them, and they can't use the timeshares anymore. If you Google search for a timeshare sharing website where you can basically buy somebody's timeshare time off of them, it's usually very, very reasonably priced, and you can try it out for a week or multiple. You know, definitely rent before you buy in the area, make sure the city is perfect. You know, talk to neighbors about the property taxes, what they're paying for homeowners insurance. I had a client call me a couple weeks ago and say, hey, I just found a, I'm down in Florida and I saw a place in the villages that was on sale and I think we might buy it. And I was just like, Tap the brakes. We've got some due diligence to do here before we just start cutting checks for 300,000, half a million bucks here.

Oh, yeah. Yeah, that's that's good. OK, so before we go, let's compare a couple of hypothetical properties with these numbers to give people an idea of what they're just a general hypothetical comparison.

So I'm going to ignore mortgages, okay? Because some people come to the table paying cash, some people don't. So let's just assume you got the cash sitting around and you're going to pay cash for the property. So Michigan Cottage, we're pretending we're buying a Michigan Cottage for $500,000. So we estimate property taxes, insurance, maintenance, total ownership costs to be around $11,000 a year, just counting sort of the That's not including mortgage payments.

That's property taxes, insurance, and maintenance, $11,000. Okay.

Yeah, that's after talking to a bunch of clients and then also looking at some actual cities. That's for a Michigan cottage. Good. That's for Michigan. So $11,000 a year in extra stuff up and above the mortgage if you had one or if you pay cash. For a Florida condo between property taxes, HOA fees, setting aside some money for special assessments, we estimated it to be around $18,000 per year.

And again, not including mortgage. That does include insurance, property taxes, insurance, HOA fees, and that special assessment reserve. Total annual ownership costs $18,000.

Yeah, so it's about $7,000 more, which, you know, $7,000 is $7,000, but on a percentage basis, you know, that's quite a bit more per year percentage basis that you're paying out. So it's about financials.

Michigan wins! Woo-hoo!

Michigan wins! Michigan does win this battle. So, yeah, that would increase your annual expenses by 60 percent. Yeah.

Well, some people might say, hey, what about taxes or I'm a senior. So maybe Florida is more advantageous. Maybe. Maybe we've talked about that on past shows, too, but you have to look at everything. And that's why before you make any decisions, work with I'm not going to name names, Ken Wink, but a trusted financial professional and the team there at Summit Financial Consulting LLC. You guys help people with these things and decisions all the time. So.

Absolutely. Yeah. Give us a call at 586-226-2100. We'd be happy to help you analyze a property purchase. You know, the purchase price is absolutely a very important factor in making these decisions. But you do have to look at the insurance and the property taxes, the HOA fees, the maintenance costs, and of course, the potential for special assessments from hurricanes or any other weather. So you got to build a realistic annual ownership budget and make sure that you're comfortable with that budget. you know, before you even plan for a dollar of rental income. You just got to make sure that it all adds up and it's not going to put you into a financial tight spot. In my opinion, the best vacation home is the one that enhances your life, but not one that creates financial stress.

There you go. Well, thank you, Ken. And again, listeners, if you have any questions or just want a consultation, there's no charge, no obligation. Call 586-226-2100. That's 586-226-2100. Or go to summitfc.net. And that does it for today's episode of Money Talks with Summit Financial Consulting, LLC, and our host, Ken Wink. Join us again soon for another episode of Money Talks.