A second home can serve as a means to get away from it all and relax during one’s vacation. Most people would rather buy a second home that can serve as their vacation home than find a place to rent every summer.
A second home can also serve as a sound long-term investment that can pay great dividends when you decide to sell. As well, you can opt to use your second home as a rental property down the road in order to generate added revenue.
However, buying a second home is not child’s play, and there are many things that you should be aware of before you start shopping around for one. Here, we will provide a guide that will help you buy a second home without breaking the bank.
Assess Your Financial Situation
Buying a second home is a serious investment that you should not take lightly. When you finance a second home, you place added strain on your finances. We would recommend that you speak to a financial advisor in your area. They are experts in their field, and will help you determine if buying a second home gels with your current financial plan.
It is also crucial that you anticipate the added expenses that you will need to pay. When you purchase a second home, you will need to make monthly mortgage payments on it. Some people who buy a second home may even have to make two mortgage payments every month.
Find a Real Estate Agent
A real estate agent can make all the difference when it comes to purchasing a second property. They will help you consider all of your needs and concerns so that you can make an informed decision at the end of the day.
A reputable agent will also keep in touch with you even after the process has been finalized. Working with a real estate agent is particularly important if you do not live near your second home.
Get a Mortgage Loan
The vast majority of people who buy a home will need to take out a loan in order to balance the costs involved. It is important to assess different mortgage options and also consider both your short-term and long-term ambitions. You should, therefore, choose a mortgage option that caters specifically to your needs.
Decide the Type of Home That You Need
The home that you purchase should be situated in a convenient location. If it is built in an area that is hard to reach, then it will fail to meet your goals. There are many things that you will need to consider, including medical care, convenience, and property tax rates.
You should also strongly consider amenities, as well as trends in property resale values. Even the type of home that you purchase will need to be factored into the equation. For instance, the expenditures incurred from buying a small home will differ from those involved in purchasing a townhouse or a condominium.
Insure Your Investment
The insurance requirements for your second home will differ from your primary insurance. Usage of the home as well as its location are two factors to consider when looking into premiums and coverage.
Insuring a second property may also end up costing you a little more money, as added risk may be involved. One way that you can save some money is by combining your second home insurance with your current insurer. In fact, most insurance companies offer multi-insurance discounts, so why not take advantage?
First, you must find a good place to invest before you take the next step. You need to determine if you can realistically afford to purchase a second property at the moment. You may also want to look into investing with a trusted co-investor, such as a family member or close friend, in order to relieve some of your financial burden.
You will need to calculate the investment costs that will be involved, which may include operating expenses and the down payment cost.
You will also need to determine how much time you plan on spending on the second property. Are you planning on buying a fixer-upper, or do you want to buy a home that is already fully renovated and furnished?
As well, you should calculate the estimated return on your second home. Remember to deduct all applicable taxes. Another calculation that you will need to go over is the amount of income tax that you will need to pay on the profit you generate.
In sum, buying a second property is a good way to build a real estate portfolio, and can also serve as a secondary source of income. Once your finances are in order, you will be fully prepared to enter the home buyers market with confidence.