Owning a second home is a dream for many and also a reality to get a relative few. It’s easy to visualize yourself enjoying holidays whenever you want, retiring to a place you love or even generating revenue for a landlord. There are loads of reasons why purchasing a second house is a good idea. However there are also some considerations that should make you think carefully before making your move.
Create a Family Home Away From Home
Second-home buyers are normally within their mid-40s and 50s — the ages where many of their parents perish and their children venture out in their own to start their families. Absent and far-flung family members mean disruptions to long-held family customs. A second house produces a gathering place where fresh conferences are born. And, like Mark Patterson notes on the “U.S. News & World Report” site, that family holiday home may eventually become your family legacy.
Prepare for Retirement
Purchasing a second home in the place where you wish to retire decades from today provides you amazing vacation opportunities and lets you set up community ties that make for a smooth transition later. It may also persuade you to retire elsewhere. Think about it a trial run that gives you a chance to build friendships, get involved in neighborhood activities and decide for sure whether that’s really where you wish to spend your golden years.
Though some blanch at the cite of real estate as an investment after the housing crash in the first decade of the 21st century, there is no reason to believe your second house won’t value over time, especially if you purchase in a resort area likely to keep its popularity. Even small appreciation over several years of ownership may be acceptable, especially because the other benefits of second-home ownership are so attractive. However, if you want more bang for your buck, then you can make investment income by renting the property when you are not using it. And, whether your second house is an investment property or strictly for private use, it’ll provide you some tax write-offs.
Tougher Financing Standards
Although many second-home buyers pay cash, there is a good chance you’ll have to fund your purchaseprice. You’ll likely require a bigger down payment, perhaps up to 35 percent, than on a loan to your principal house, and you’re going to pay more in interest compared to a primary-home mortgage. You’ll also require a higher credit score and substantial income to qualify. New rules often prevent investment real estate buyers from using anticipated rental income as qualifying income for their loans. These days, you must claim at least a year’s worth of rental income in your tax return before lenders believe it.
Changing family and work situations keep some second-home owners from their holiday places for many years, and sometimes years, at a time. Common reasons for protracted vacancies include inability to take time off from work, waning interest among almost-grown children and the death of a spouse. Additionally, a job relocation or a change in financing due to a job loss may compel the sale at an inopportune time or direct one to convert the house to a investment property to cover expenses.
Second homes require maintenance. If yours is situated in a spot with extreme circumstances, such as the beach or the mountains, or you rent it when you are not using it, then it may require a good deal of maintenance — generally at the most inconvenient times. You’ll also have to prepare for raising property tax and, in case you’ve got a condo or homeowners association, fees and assessments.