So, you currently own a home that you love and appreciate, but you are contemplating purchasing a second home. Perhaps you are in the market for a second home, or maybe you want to invest in a rental property. Regardless of why you are purchasing a second home, here we will explain what you need to consider before making your purchase.
Investment or Owner-Occupied?
If you personally intend to occupy the home, you qualify to deduct the interest on your second residence when tax time rolls around.
On the other hand, if you intend on renting out the home for at least 14 days out of the year, you are unable to claim the interest deduction. Although the money spent to maintain the property can be claimed if it is a rental home.
Does Your Budget Support It?
Since you are thinking about purchasing a second home, you have probably considered whether you are financially able to take on this purchase. Whether your income and cash reserves support taking on a second mortgage and your ability to pay the down payment are the most fundamental factors to consider.
However, there are more factors to consider when looking into a second home purchase. You obviously have to consider property taxes, repairs, maintenance, and furnishings.
Consulting with a financial advisor will give you a more profound understanding of the overall fiscal responsibility that will be incurred with the purchase of a second home.
Consider Your Time Availability
There’s no question that there is an inherent thrill involved in the process of purchasing a second home. This level of excitement can cause buyers to fail to really evaluate how much time they will actually be able to spend at the second residence.
The time availability issue becomes complicated once children enter middle school, where activities and demands increase. If it turns out that your teens athletic or scholastic obligations keep you from visiting your second home, your purchase will be in vain.
What’s Your Annual Maintenance Plan?
A second home is often considered a vacation home. This means that during most of the year, you will be residing in your first home. You have to take some time to seriously consider how you will maintain the property while you are away.
The most logical solution is to have a local property management company to take care of the property while you are away. This will help keep your property well-manicured and up to code.
What Professionals Will You Use?
When you are purchasing a home, you need industry professionals to make sure the deal goes through smoothly. Mainly, you will need a real estate agent and a mortgage professional to handle the fine details of the purchase. While 28% of second home purchasers don’t require mortgage loans, most will need to find an excellent realtor.
While purchasing a second home is an exciting event, don’t let the excitement keep you from doing your due diligence before making this major purchase. Seek the help of professionals to get all of your questions answered before entering into a purchase contract for your second home.