If you are thinking about buying a second home, you may be considering the pros and cons. Is it the right decision for you to make the leap and purchase a vacation house? The purchase of a home is by no means a small decision. Where there are benefits, there are risks as well. Before taking the plunge, give every aspect a thorough consideration to make buying a second home a pleasant experience. Here are the top reasons that you need to consider carefully.
Are you getting a second home to build wealth? Bear in mind, it may not do so and the constant maintenance may be more of a financial burden. In this regard, the selection of a property is crucial. Choose a well-designed house with a great desirable location, so that the value appreciates over time.
If you are looking to have a place of your own when going on vacation, it may seem a convenient option to buy a home. But, what if the home is not used enough and ends up as a waste of money? Take into account that the property will remain unoccupied most of the time. You may not be able to take care of repairs in a timely manner. Additionally, you will have to have the house insured and take care of security concerns. If you can handle these responsibilities, then get a vacation home where you can make some worthwhile memories and enjoy your time away from home.
Is a second home a part of your retirement plan? If that is the case, then there are specific considerations. The house layout must be age-appropriate. For example, you would want wide doorways, open floor plans, little or no stairs, and a bedroom on the ground floor. The location needs to be a central one, with all the facilities nearby and plenty of local activities to keep you busy.
At times, people buy a place only to sell it for better value. What if you get stuck with it and the value depreciates instead? Property value always fluctuates and the investment can be a risky one, especially if it is for the short term. Do it only if you have a good knowledge of the market and can identify the home’s potential value. Choose an area with a robust housing market to benefit.
If you want to rent out your second residence, but it doesn’t pay much or attract suitable tenants, then again it won’t add any value. Renting a property has benefits, but hassles as well. You will have to choose the right people and should know the rental laws and all tax scenarios. Also, do you have the time and energy to be a landlord? If yes, then the financial benefits can be substantial.
If you have plenty of money, why not buy a vacation home? Remember, though, to think about all the hidden, unhidden and unforeseen costs. All these are solely your responsibility. If there is a pipe leakage and any other maintenance issue that arises simultaneously which is very much possible, it can mean a big bill. Are you ready for such expenses?
Work out all the financial costs of both your houses, down to every detail. Calculate the taxes, home insurance cost, utility bills, Homeowners Association (HOA) fees, repair, and maintenance expenses. Other than that, always keep a little extra for contingent expenses. Making a comprehensive budget will give you an accurate picture of the budget required to maintain both houses and you will be in a safer position financially.
Buying a house means a big payment upfront and you may not have all of it in cash. If you have your second residence financed, you may not get it on very favorable terms. You will need to demonstrate high-income and have a good credit history. You will also have to give a higher percentage of down payment and interest rate on the mortgage than you did on your primary home. Calculate all the amounts to know how to go about the payment process.
Being able to afford a second property is not a valid enough reason to make the investment. It is a time-consuming process that involves a lot of work and energy. Be clear about your goals and take your family on board. Think over all the possibilities and if you think you can handle the responsibility now and in the future, only then take it up.
Since this is a big decision, it requires extensive research. Jog down your requirements and find out the best neighborhoods that match it. Get to know the areas that interest you. Take opinions from experts and people living in the vicinity. Find out about the worth of property there and all the pros and cons. Get to know about the tax laws of the area because they vary from place to place. It is best to get help from a tax professional. Study the buying trends and do not rush the process. Property purchase is a big investment so consult a real estate expert or a financial advisor who can guide you every step of the way.
Remember, the responsibilities you have if you purchase a second home are ongoing. Property maintenance and other costly decisions regarding your property continue for as long as you own it. If you can tolerate the inherent risks, buying a second home may be a great decision.