Whether you have paid off your first home or just have extra money to spend, buying a second home could be your next big real estate move. Before you commit to owning a second home, whether as a vacation home or income property, there are several things to consider in order to make a responsible decision. Take time to do your research on both potential properties and your own short and long-term financial goals before you begin to browse what is available.
Can I Afford a Second Home?
Before you even begin to daydream about a second property, ask yourself if you can truly afford it. Many people decide to purchase their second homes right before or at the beginning of retirement, while others choose to buy a new home while they are still actively working. In any case, knowing you are financially stable enough to afford an additional home is paramount, as if you fall into too much debt, it can be next to impossible to recover financially.
Work with your financial advisor to determine if you can take on an additional mortgage payment, along with homeowner insurance and utilities. If it is going to be a big stretch or have a major impact on your current lifestyle, you might want to save up for a few more years before purchasing that second home.
Know All the Costs
If you do have the money available to responsibly purchase a second property, ensure you know the primary purpose of your purchase. For example, will you be using this property as an income property to rent out to others? If so, make sure you know the ins and outs of renting before you make the purchase. Or, if you are purchasing a vacation home, make sure you plan for any short-stay renters via AirBnB if you are planning on going that route.
It’s important to be aware that most mortgage rates for second homes can run a bit higher than your first, unless you are paying cash or have a sizeable cash down payment. You should also look into additional costs that can come with purchasing in a different state, including insurance costs associated with hurricanes or flooding. Finally, be prepared to learn more about HOA regulations and requirements if you are looking at a second home within a developed neighborhood.
If you have found yourself lucky enough to be in the position to consider buying the perfect second home, you want to make sure you do it right. Understanding landlord laws and property taxes for a home across the country can be a daunting task. There is no better time to reach out to Bell & Shah, as their knowledgeable real estate attorneys can help navigate you through the buying process to ensure your best interests are at the center of every decision.
