What To Consider Before Buying A Second Home

Are you thinking of buying a second home? Perhaps as a vacation residence, a rental property or an alternative place to live near your family? A second home can be a great investment, can improve your lifestyle and can bring you rental money. However, there are a number of things that you need to keep in mind when you are buying a second property.

Do Your Research

Don't get too carried away with the idea of a second home in a specific area, before you have actually done your research and learned about that area in depth. Even though it is your second property, it is still a major investment so it makes sense to do your homework first.

Don't Forget The Extra Expenses

When you own two properties, you will also have to pay twice for electricity, insurance, taxes, repairs, utilities, furniture and much more. Make sure that you factor in the additional expenses of owning a second home so that they don't catch you by surprise.

Watch Out For Higher Interest Rates

Did you know that interest rates on second home loans are often higher than the rates for primary residences? This might only be a quarter of a percentage point, but this can really add up over the lifetime of the loan. If you are able to come up with a larger down payment you will be able to reduce the total interest on the loan and save yourself a significant amount of money over the years.

Renting Out Your Property

If you are planning on renting out your second home when you are not using it, you will want to do some research on this in regards to your taxes. In particular, read the "Home Mortgage Interest Deduction" and the "Residential Rental Property" publications by the IRS. This will help you to understand the different tax codes on rental property. If you rent out your second home for more than 15 days per year, you will need to report the rental income but you will be able to deduct expenses such as maintenance and cleaning.

Buying a second home is a major decision, so make sure that you take all of these factors into consideration before you make your final choice. Feel free to contact me at 718.370.3200 or email me at info@tomcrimminsrealty.com for more second home details.