Everyone loves a home away from home that’s how the concept of luxurious second homes came into existence. A second home is a residence you intend to occupy for part of the year in addition to a primary residence you already own. Second homes can be used for vacation, but can also be property visited on a regular basis, like a condo in a city where you conduct business.
It’s important to understand that although a second home and an investment property may seem similar in many ways but are different in realty; an investment property, is a home purchased with the intention of earning a return either through rent, future resale or both. However a second home qualify for a much better mortgage rate than investment properties. But buying can still be risky when not carefully thought out. Here’s a list of five important factors to keep in mind in your search for a second home.
According to the National Association of Realtors, majority of second homes purchased by thoughtful investors are within 100 miles of the buyer’s primary location, while 46% were located more than 500 miles away. Both income and free time should be considered when purchasing property so far away from your primary residence. Distance is of great importance as you want to make sure that moving back and forth.
Generally every second home buyer is looking for away from the chaos yet close to the major city, close to a suburban neighborhood. Having a lake close by is also ideal, however it is important to also find out if the property can be left unattended for a few months at a time. How much would the regular maintenance like heating and cooling bills cost? After you have answers to all these questions its crucial to keeping in mind that a second home, unlike a rental home, is still your responsibility even after you leave.
Time Frame for Owning the Second Home
How long do you plan on owning your second home? Second home buyers planned to own their property for a median of 10 years. Parents with young children may have different objectives than empty nesters and retirees, but choosing the right second home ultimately has to do with how long you plan on having it, too.
Request several recent tax bills, advises a source. In some areas, houses are often re-appraised and taxed at higher rates. An initial price bargain could quickly be negated if property taxes rise year after year. Research the area and its tax code to see how your money is spent. In some cities, schools are substantially funded through property taxes – meaning you can count on yours increasing often.
Mortgage for the Second Home
Is it for you? Nearly half of all second home buyers pay cash for their new property. Though interest rates are rising, they’re still near historic lows, making a second home mortgage a reasonable option. Financially speaking, if you’re serious about buying a second home, be sure you can use it frequently. Otherwise, it could just become a terrible financial burden. Besides paying all of the costs associated with home ownership, you’re passing on potential investment returns, and banking 100% on the maturity of your second home’s property value. It almost always makes more financial sense to invest in stocks, bonds, and other markets – but the enjoyment of spending years at the right second home could be priceless.