There are a few reasons why people decide to buy a second home. They are either looking to use it as an alternative source of income, as a getaway home for themselves, or as a retirement home for the future. Of course there are other reasons for buying a second home, but these are the most common that drive people to make the decision. Although the process in choosing an area and a home in which to buy your second dwelling is similar in most cases, there are a few variables for each reason to buy that are helpful to consider before getting started.
Keep in mind that if you are purchasing a second home as an investment, or with the intention of renting it out as a part-time vacation home, you must consider the ongoing expenses in addition to the usual upkeep of the property that comes along with owning a second rental home. Expenses such as management company fees and hazard insurance, for example, can take a big portion out of the allotted money people set aside for their second properties, leaving them with less to spare than expected. If you rent your home for more than 14 days a year the IRS considers you a landlord and you have to declare your rental income at tax time. Although you will have the privilege of certain deductions, these claims and expenses should be taken into consideration initially.
If you aren’t planning on renting out your second home to offset the cost, but plan to use it as a getaway or eventually a retirement home, there are still hidden fees to be aware of. People don’t realize how much it can cost to hire a lawn-mowing or landscaping service. Since you won’t be living at your vacation home or at the retirement dwelling yet, someone will have to do the work, and since it won’t be you, you will need to figure in the cost of paying someone else to do it.
A second homeowner’s insurance policy is required when there is a loan involved no matter the type of second home you are purchasing. Also, as vacation homes or secondary homes remain empty for a good amount of time, they are more susceptible to falling victim to vandalism or break-in, therefore a home security system would be a wise investment to include in your new property expenses.
These are a few financial elements to consider before purchasing a second home. To get started, consider these circumstances, and if you are prepared, proceed as you would in any other home buying process and contact an Eillu real estate professional to get you headed in the right direction to owning your own second home.