Am I Ready to Buy a Second Home?

Are you dreaming of owning a little piece of paradise, making some profits or planning your retirement? If you’re going to buy a second home, determine your long-term goals and find out if it makes financial sense before you start house hunting. There’s a lot to consider. And you have to do it correctly.

Buying a Second Home for Paradise

One popular reason to own a second property is for a place to call your vacation home. Owning a vacation home for getaways sounds glamorous (and it can be) but make sure you’ve visited the area a few times first and you’ve crunched all the numbers.

Ask yourself a few questions:

• Think about how often you’ll use the property. Is it enough to warrant the extra expenses (electric, water, insurance, etc)?
• Who will take care of the home while you’re away? Management fees will cost extra but a local property manager will maintain your home to prevent damage from things like a leaky roof and frozen pipes in the winter.
• Are you going to buy a second home with others? If so, consult with an attorney first.
• Will you be renting out the space when your family isn’t occupying it? Be sure to calculate all costs and choose a home that can be rented at the frequency you need to cover expenses.

Buying a Second Home for Profit

A second home is a terrific investment opportunity but some second home-owners aren’t really prepared to become a landlord. Finding good tenants (or trustworthy vacation renters), understanding leases, dealing with property management and ongoing repairs are just a few things involved. If you’re renting out a vacation home, be prepared to give up some of the peak-season vacay to really maximize your home’s rental income.

For more information about investing in a rental property to help you build wealth in a relatively fast and secure way, see Buying Rental Property? 5 Smart Moves to Get Started.

Buying a Second Home for Retirement

Are you planning to retire somewhere else? Perhaps you’re looking at a second home in a warmer location, one with a more favorable tax bracket, or a home that’s closer to family. Either way, preplanning is important and the first step is taking inventory of your current (and future) financial situation. When you start looking at property, take into consideration all the same factors you would when buying your primary residence.

Also consider your surroundings. Pick a location that offers the kinds of things you may need as you get older. For example, what if all of a sudden you can’t drive, you can’t get to appointments or the store. Will you be forced to rely upon rides from relatives? Plan ahead for any possible scenario.

Does it Make Financial Sense to Buy a Second Home?

Based on your budget and plans to either live in or rent out the new residence, make sure it’s a smart investment and you’re ready for all it entails. Be prepared for all the “other” ongoing costs of owning a second home including: maintenance, non-deductible property taxes, homeowner’s association fees, property management company, insurance, landscaping and even furnishing.

If you have some secure disposable income and real estate is where you want to put it, let’s start looking for your home away from home!