There are a lot of reasons to think about getting a second home. If you have a favorite vacation spot, it can be helpful to have a home there to stay at whenever you visit, rather than having to find a hotel or rent out someone else’s home every time you want to go and visit. However, a second home can be a major investment that ties up a lot of capital or potentially strains your future purchasing power. Here are some things you should consider when purchasing a second home…
Purchasing a Home vs. Renting One
If you’re considering renting instead of buying, you’ll want to consider what you’ll want to do with the house. For example, if you rent it, you won’t be able to customize or upgrade the house to what you really want. In addition, if you’re renting it out, that means you won’t have the liberty to rent it out to other people during the year. Renting may be cheaper in the beginning, but it gives you less freedom to do what you’d like and renting a house that you won’t be spending the majority of your time at doesn’t really make sense. Real estate is a good investment, and buying a second home is an investment you’ll get to enjoy for the rest of your life.
Location. Location. Location.
Location is one of the first things you should think about when considering purchasing a second home. You want to pick a location that you’ll actually visit often, so your home doesn’t go unused. The first step is to evaluate what your favorite vacation spots are. Another helpful thing is to think of what extracurricular activities there are in that area that you’ll want to be doing, year-round, whether that be skiing in the winter months or hanging out on the beach in the summer months. There should be plenty of vacation potential in a second home.
A second-home sort of functions as both a living space and an investment property. Because of this, you should be thinking in terms of luxury, when it comes to a second home, and luxury real estate can become a huge investment. Depending on where the home is and the specific regional applications of that home, luxury can mean many things. Certain amenities, such as pools, spas, gyms, and views are a key part of creating a luxury home environment.
As for general home amenities, kitchens and bathrooms are huge for creating a luxury aesthetic. An updated, modern kitchen goes a long way towards generating higher home value! After purchasing a home, consider other interior remodeling steps you can make to add more elegance to your second home.
Consider Using It as a Rental
Especially if the home you’re purchasing is in a great location for year-round activities, it could be a great idea to rent out your home during the parts of the year that you’re not there. Consider renting it out through services like Airbnb, which will give you the flexibility to have your home available to you during the weeks and months you’ll be there, and then rent it to various tenants throughout the rest of the year.
Remember, Second-Home Mortgages Can Be Unique
A second home, or vacation home, is one that you only plan to occupy for part of the year. The home must meet all the inspection requirements of a primary residence and usually needs to be at least 50 miles from your primary residence in order to qualify as a vacation home. Second-home mortgages have more stringent lending qualifications because buying a second home usually means you will be paying two mortgages. Mortgage rates are usually higher for this type of loan as well since the risk is higher for the lender. If your second home doesn’t meet the lending requirements, such as being too close to your primary residence, it may be classified as an investment property.