Does Buying a Second Home Make Sense?

So, you’ve reached a point of financial comfort and you’re wondering how best to invest your money. There’s always stocks and bonds, but those feel a bit abstract to you – not to mention subject to market forces that sometimes seem a bit whimsical. What you’re interested in is real estate. After all, as the old adage goes, they’re not making any more of it. Your investment could end up turning into a second home.

If your investment property can also serve as a vacation getaway for your own family, or a place to eventually enjoy your twilight years, then better for you.

If you have questions about when, how, and why to buy a second home, you’re not alone. Here’s everything you need to know about whether the decision is a smart one.

Why Buy a Second Home?

While buying a second home might sound like something reserved for millionaires and their wealthy friends, it’s an accessible goal that many people can realize. Here are some of the most common reasons people buy second homes:

• To make additional income.By purchasing an additional home and renting it or “flipping” it, homeowners can make hundreds or even thousands of dollars on their investment.
• To have a place to vacation.With the popularity of home rental sites like Airbnb and VRBO, it’s possible to purchase a vacation home, use it when you want, and rent it on a short-term basis the rest of the time.
• To learn more about remodeling.While flipping homes is a great way to make additional income, it’s also a fantastic way to learn more about the remodeling process and educate yourself on the ins and outs of handyman work. While it’s not an approach for the faint of heart, buying a second home is a great way to learn about home improvement and renovations.
• To invest funds.If you’re financially secure and looking for a place to invest some funds, real estate is a fantastic option. This is especially true if you buy a second home in an in-demand neighborhood where property values are likely to rise in coming years.

When Buying a Second Home Makes Sense

While the purchase of a second home can be a smart decision, it doesn’t make sense for everyone. Here are a few prerequisites that will help you know you’re ready to make the plunge:

• You’re financially comfortable.Buying a second home is an investment, and you need to have funds to invest to make the leap comfortably. Ideally, you should have paid off your first home, be free of significant debts, and have a comfortable buffer – at least a few months of the mortgage payment on the second home – in the bank.
• You have some spare time.Buying a second home takes time, even if you hire an agent to help you. It’s not advisable to take on the process unless you have some time to devote to it. Simple things like showings, meetings, and signings can eat up a large chunk of your available time, and it’s critical to understand this going into the process.
• You have a concrete plan.If you aren’t sure what you’d do with a second home, don’t buy. This is a step that’s reserved for people with a solid direction for the second home, and an understanding of what they’d do with it once the deal closes.

Buying a Second Home – is it Right for You?

If you’re considering buying a another home, considering whether it’s right for you is a smart first step. If you have some money in the bank and some spare time on your hands, the answer is probably “yes.” If not, you might be better off waiting to buy a second home until you have more resources. No matter what you do, buying a second home should be exciting, and can be a great opportunity for advancement – both financially and personally.