Everything you need to know
There are several reasons people consider buying second homes. It’s also an exciting prospect that can bring up a lot of questions. Second homes can be used for fun, as an investment, or both. If you’re seriously considering purchasing an additional dwelling, here are some things you’ll want to consider.
What is the purpose of your second home?
Are you looking for a place to go on the weekend, during the summer, as a retirement home, or a place to rent out either as a vacation rental or to a full-time renter? You may wonder why it matters. In short, its determined use is going to affect your budget differently. Insurance costs and tax breaks are going to vary depending on your second home's primary purpose. Take the time to explore what the costs look like in each scenario.
Can you afford it?
Maybe you can buy a home outright, or perhaps you’ll be financing. Either way, those costs (a mortgage or the price) are only the beginning. You’ll also have to look at some of the following potential costs:
- Insurance
- Property management
- Maintenance
- Homeowners’ Association (HOA) fees (if applicable)
- Utilities
- Upgrades/renovations
Before buying, sit down and list all the additional costs you're looking at. It can help give you an accurate picture of whether the home will fit in your budget or not.
Is the investment worth it?
If you plan to hang onto the home for a long time and it’s for personal use, you may not worry as much about whether the investment will pay off or not. However, if you plan to make money from your investment, or are looking at areas that are currently developing, it’s crucial to do your research.
Some of the things people look at when buying second homes are how hot the long-term rental or vacation rental markets are. You also want to look at the neighborhood itself. Is it established? Does it have excellent potential? Or is it a neighborhood that deals with chronic issues that may affect the home’s value? Also, what's in the works for the community? Is it likely to remain the same, or will it get developed in a way you'll be okay with?
Look at the overall real estate market as well. Are you buying at a peak, or have you timed it where you are getting a great deal? All of these factors matter. Even with your research, it can be beneficial to work with a local agent who is a straight shooter and highly experienced.
Purchasing second homes
Buying a second home is much like buying your primary residence—it’s going to depend on your credit and income, and you’ll need to get qualified before buying.
A second home can be a rewarding experience. All you need to do is ask yourself a few simple questions before taking the plunge.
Equal Housing Lender