Buying a Second Home??
Where To Buy A Second Home
Deciding where to purchase your next property is a major decision. Should you get a home close to your family? Or would you prefer one on a beach, in the rural area or in a city you love?
It’s important to discuss locations with your spouse or other family members who might be included in this decision. From there, spend time researching the best local neighborhoods. Partner with a local real estate agent so you find the best areas for a second home.
What Will The Second Home Be Used For?
Some buyers already have a clear vision for their second home before making their purchase, but it’s OK if you’re not sure. Consider your options — it may even change your location.
· Vacation home: If you have a large family, you vacation often, or simply want your own spot to call home when you’re away, a vacation property might be what you’re looking for. You should choose a location you love visiting and exploring.
· Secondary residence: Does your job require a good deal of travel or time spent in another city? You might consider using your property as a secondary residence.
· Airbnb: If you don’t see yourself using your secondary property that often, consider purchasing a home that could double as an Airbnb. Buying a home in a popular location will improve your chances of maintaining regular Airbnb business throughout the year. Just be sure you buy a home in an area without Airbnb restrictions.
· Short-term rental: Your home might even be largely unoccupied most of the year. If that’s the case, you can also look for short-term renters to generate additional cash flow. For instance, if you plan to use your vacation home in July and August, you could look for college or graduate students to rent your home for the rest of the year. You can also search for tenants who are looking for less than 6-month leases.
You can also use your second home for any combination of the above. You could vacation there for a designated period of time and rent it out via Airbnb and short-term leases for the rest of the year.
Can You Afford A Second Home?
Are your finances ship-shape so that you can afford to buy a second home? Even if you plan to collect rental income from the property, you’ll want to be sure it’s a purchase you can afford, particularly if it will remain vacant for several months.
Monthly Budgeting
You may be approved for a second mortgage on paper, but you’ll want to crunch the numbers to see if an additional mortgage makes good financial sense. The best way to do this is to add up all of your monthly payments and subtract this number from your monthly post-tax salary. The remaining money is where your second mortgage payment will come from.
You might be counting on rental income to help balance out your second mortgage payment, but you’ll still want to make sure you can afford the payment on your own, in case your property doesn’t rent as quickly as you’d like.
In addition, you’ll want to take property taxes, council fees and general upkeep costs into consideration before you make this decision.
Rental Maintenance
You’ll also want to be prepared for the cost of maintaining a rental property. As both owner and possibly landlord, you’ll be responsible for handling all repairs and damages. This could mean paying a handyman for services, purchasing paint, doorknobs and other home improvement products or paying a lawn service to maintain the yard.
Save at least 10% of the yearly rent for upkeep and maintenance. If your property rents for $2,000, the yearly rent would be $24,000. Therefore, you should save $2,400 in case of emergency repairs. Keep in mind, repairs could cost more or less than this estimate, so it’s always a good idea to have more money saved.
