5 Factors to Consider When Buying a Second Home
For those who are fortunate enough to have the resources to afford a second home, the options can seem endless. From beachfront villas to mountain cabins, there are lots of different possibilities to choose from in terms of location and house type. But before someone takes the plunge and makes this kind of investment, there are several things they might want to consider. In this article, we’ll discuss five important factors that one should keep in mind as they contemplate purchasing a second property.
#1: The Most Obvious Factor – Cost
Before an individual begins searching for their dream vacation home, it’s a good idea for them to establish a budget. This can help prevent someone from ending up with an investment that costs them more money than it's worth. Keep in mind that the house’s purchase price is only the first expense. There are many other costs typically associated with owning a second home that can include maintenance, utilities, insurance, property taxes, and possibly even rental management fees. It’s generally wise that one prepares a budget that takes into account all of these factors so they can realistically estimate the full financial impact of this purchase.
#2: Location, Location, Location
It’s usually advisable that one chooses a location that matches their lifestyle while also offering practicality. It’s nice if the location is a place that the person loves. Still, they should also take into consideration how far away it is from their primary residence and the accessibility to amenities like grocery stores, hospitals, and restaurants. Also, one might want to think about zoning laws, building codes, and HOA requirements before deciding to buy.
#3: Uncovering the Real Reason
One should also ask themselves exactly why they want to purchase a second home. Will it be for personal use, investment purposes, or both? If it is intended for personal use, it might be a good move to determine the amount of time one plans to spend at the property every year. If, on the other hand, they plan to rent it out, are they in it for the long haul or will it be a short-term investment?
#4: Evaluating Financing Options
Even the wealthy should explore all their financing options prior to entering into this type of agreement. There tend to be different choices available, including a cash purchase, taking out a mortgage, or combining a mortgage with a cash down payment. Discussing one’s available options with a qualified financial advisor can be very helpful in this situation. It’s also generally wise to verify a financial institution's credentials before applying for financing.
#5: Deciding How to Manage It
Finally, after the purchase is complete, one’s concerns about their second home don’t usually end there. For example, if their vacation home isn’t close to their primary residence, then there might be a need to have management in place to oversee and maintain the property, clean it, make repairs, schedule renters, and more. An individual should think about whether they want a property management company or a good caretaker to oversee the upkeep of their property if they don’t plan to do it themselves.
Without a doubt, buying a second home, while sometimes fun and exciting, can be a significant investment decision even for someone of substantial means. In general, one should put serious thought and consideration into the purchase before pulling the trigger. However, with some long-term planning, due diligence, and research, purchasing a vacation or rental property can end up being a prudent – and enjoyable – investment. CRN-5767987-062223