Buying a second home can be a valuable investment. While many property owners buy a second home for the purposes of vacationing with the family, others choose to rent it out, converting it into another source of income. Whatever your reasons, there are several considerations that need to be made before committing to a down payment, namely:
- Consider location
- Establish your budget
- Find the right realtor
- Consider co-ownership.
Location, Location, Location
Everything is affected by it. The price of the property, the ability to resell down the line, and the activities that residents can engage in. Taking the time to find an area that possesses amenities that will increase your property value, like a nearby, highly-rated school district, can greatly increase the value of your investment.
By using location to guide your search, you can find also find a home in a price range that fits your budget. If you plan to spend half a million dollars, it might be difficult to find beachside property on the Malibu coast. At the same time, you probably wouldn’t want to look for property in an area with homes that generally fall below your budget, because they will likely lack the surrounding infrastructure to boost your property value.
The final location-related consideration should be the second home’s proximity to your first. Do you want it to be a car ride away, or do you mind if you have to take a plane to get there? Some homeowners like the ability to stop by and check on their second home whenever they like, and if you put a lot of distance between you and your second home that might cause unnecessary stress.
Establish Your Budget
Whatever you do, don’t let your second home put you in debt. Many homeowners get caught up in the excitement of purchasing a second property and hurry through the necessary budget calculations to avoid a financial disaster.
Financing your second home should be a carefully thought out decision. Check for the best credit union mortgage rates available in your area, or speak with a professional financial advisor who can help you determine a reasonable down payment. Securing a mortgage can help introduce tax deductions that property owners who buy outright won’t be able to take advantage of.
Choose a Local Realtor
Unless you are a realtor yourself, chances are high that you aren’t familiar with the nuances that differentiate each neighborhood in the area where you want to buy. A local realtor can be an invaluable resource in helping you locate a perfect property and providing you with the information needed to ensure that it retains its value over time.
Too often, property owners don’t consider the fact that they might eventually resell their second home. Maybe they have trouble finding renters in the months when they don’t occupy it, or they find they can no longer afford their second mortgage. Professional realtors will be able to furnish information about how other homes in the neighborhood have fared on the resale market, and can help establish projections about how a resale attempt might fare in five or ten years down the line.
One of the best ways to cut down on property costs is to enter a co-ownership agreement with a trusted partner. Maybe your family and a family of close friends have enjoyed vacationing in a mountain town and sailing around a lake for years, and have separately considered buying a cabin. By pooling your resources, you can end up owning a property at only a fraction of the cost.
Another benefit of co-ownership is that it potentially cuts down on the amount of time the property is unoccupied. Often, especially in the case of vacation homes, the house is left untended for large portions of the year. When you split the home with another family, you can take turns occupying it, which deters squatters or other criminals from stopping by when you aren’t there. And, of course, helps with general upkeep.
Final Thoughts on Buying a Second Home
If you calculate your budget and discover you are ready to purchase a second home, congratulations! Owning a second home is an exciting and potentiality lucrative investment, one that can lead to years of fun and lasting memories.
However, before you decide to pull the trigger and agree to a mortgage or commit to a down payment, make sure you carefully consider the location, establish your budget, find a local realtor, and consider the possibility of co-ownership.