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Owning a second home gives you an opportunity to spend part of your time living in another area or bring in another source of income if you rent it out. Purchasing another home is a major investment that requires careful consideration. Before you begin looking into properties for sale, keep the following factors in mind for your second home.
Whether you have a location in mind or you’re exploring your options, make sure you get to know the local area well prior to making a purchase. If you’re thinking of buying property in a vacation area you’ve visited before, you should learn more about what this location is like in the off season. If you’re considering places you’ve never been, gather as much information as you can about the area, such as local crime rates and average weather conditions throughout the year. Talk to others living in your desired location to learn more about pros and cons of the area.
Your second home could be a single-family house, condo or townhome. If you plan on using the property often and you want more privacy, a single-family house might be the right choice. Just keep in mind that you’ll need to make sure you maintain the property all year round. A condo or townhome might offer a better option if you only plan to visit your second home a few times a year, since you won’t have to worry about yard or pool maintenance.
In addition to paying a mortgage and property taxes, there are other financial factors to take into consideration. For a vacation home, you might have added expenses, such as flood insurance in a hurricane-prone area. You’ll also need to include the cost of maintaining the property throughout the year, such as professional yard maintenance or routine HVAC maintenance. If you plan to rent out your second home, you might need to factor in the cost of hiring a property management company. In addition, you may need to include HOA fees if you buy a vacation home or rental property. Confirm that the lender you utilize is very familiar with second home lending requirements to prevent pitfalls in financing.
When you know where you want to purchase a second home and start looking into available properties, work with a local real estate expert. These agents are familiar with the local market, which helps ensure that they’re able to find you a home that fits your needs. They’ll also be able to determine the right asking price based on current local market conditions.
The tax situation for your second home will depend on whether or not you rent it out and for how long. You’ll need to report rental income if you rent it out for more than 14 days per year, but you’ll also be able to deduct the cost of rental expenses. Since tax rules for property ownership can be complex, get detailed information about your situation before choosing a second home to purchase.
