With the incredibly low-interest rates available to home buyers taking out a mortgage, now seems like the perfect time to invest in a second home.
Perhaps you want a vacation home that you can sneak off to every other weekend during the year, or maybe you want to collect rent on a property. Either way, no matter what your reasoning, here are eight things you need to know about buying a second home.
Things to know about buying a second home #1
Do your research
I can’t tell you how many people I know go off on vacation and then return thinking that buying a second home is the greatest idea since sliced bread and then jump into the search without doing any homework first.
You must resist the urge to buy a home because you want a getaway, research the properties and area beforehand.
Things to know about buying a second home #2
Stop and think about the type of home that would suit your and perhaps your family’s needs and lifestyle. You need to consider proximity and what you plan on doing there.
If you want to hang out and just listen to nature do her thing, then a home surrounded by forest and perhaps water would suit you best. Consider your needs.
Things to know about buying a second home #3
Visit the area. Then visit it again.
What some people don’t realise is that vacationing somewhere is not the same as owning real estate there. If you want to buy a second home, check out the area when it’s off-season and talk to the people who live there about the everyday goings on of life in the neighbourhood.
Things to know about buying a second home #4
Decide on the kind of home you want
A single-family home requires maintenance on a regular basis, whereas a condo requires that you pay someone else to take care of it. So depending on what your objectives are, make sure you understand the logistics of what a home requires before you make your decision.
Things to know about buying a second home #5
Shop around for a mortgage
While most might naturally assume that getting a second mortgage with the same lender that gave you the first one would garner you the best deal, research has it that you should definitely shop around and see what else is out there before you commit.
Your objective should not be loyalty, but rather getting the best possible deal.
Things to know about buying a second home #6
Calculate the extra expenses
From insurance and maintenance to taxes and repairs, you absolutely need to factor in the additional costs of buying a second home. Keep in mind that it’s usually the most desirable areas to live that are prone to natural disasters, so make sure your insurance offers you incredibly coverage.
And when it comes to maintenance, a good bet is to set aside about 2% of your home’s value per year.
Things to know about buying a second home #7
Consider sharing ownership
Buying a second home on your own can typically run you a whole lot of money, so why not consider buying it with a close friend or relative? That way you can share the costs and enjoy a vacation home for half the cost.
Mixing business with personal is not an easy thing, however, so make sure that you aren’t casual about the deal.
Things to know about buying a second home #8
Take advantage of tax benefits
While it’s true that you don’t have to pay taxes on rent income if your home is only rented out for less than 15 days a year, but you then won’t be able to deduct the rental expenses.
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