If you’ve done well for yourself with the purchase of your first home, you might consider buying a second one. As this one is not a necessity, it poses a great opportunity for investing. However, it is quite tricky knowing when the time is right for such a big move. For many people, it implies investing their entire life savings into it. For this reason, this kind of move requires a lot of contemplation and research.
Why Buy a Second Home?
There are various reasons why you might consider buying a second home. Firstly, it could be a sound investment. While the market ebbs and flows, investing money in residential property is often profitable. Secondly, a second home can be great if you are nearing retirement. Depending on what you buy and where, you can use it as a vacation spot while you’re still working and develop plans to move there once you’ve retired.
While you’re not living there, it can also be a source of additional income if you treat it as a vacation rental. With the advent of services like AirBnB, this is now easier than ever. Finally, once you end up downsizing, simply pack up your things, look into hiring moving help you can rely on, and move to your second property. At this point, you can rent or sell the first one.
When is the Right Time to Invest in a Second Home?
If your sights are set on buying a second home, the main question you should be asking is: when is the right time to invest in a second home? This is quite a complex question. In part, the answer hangs heavily on your personal finances and where you are in your life. In other ways, though, it also depends on outside factors like the state of the market. Here are some general points to consider whether the time to invest in a second home is now.
Does Time of Year Matter?
If you want to buy a vacation spot as your second property, the time of year can have an impact on the prices as well as the options that will be available. For example, if you want to get a second home in a beach area, your best bet is to do it in winter when tourism is slower and, thus, the properties on offer are more affordable.
When it comes to mountainous areas, the best time to look for a home is spring and fall, whenever tourism inevitably slows down because of weather. Finally, when it comes to metropolitan areas, real estate sales are the slowest in July to August and December to February. Of course, this is not to say that you can’t find a good opportunity outside of these timeframes. There are so many variables in real estate, and you should take them all into account.
Location, location, location
Location doesn’t only greatly influence the resale value of your home. It can also be the key difference in the value of two similar properties. Namely, just like the market changes in cycles overall, it does the same thing locally. Certain parts of the country are experiencing a real decrease in sales of real estate in recent years. These kinds of places offer great deals for people wishing to invest in a second home. It doesn’t mean that these locations are less desirable. It just means that currently there is lower interest in that particular area. However, if something seems too good to be true, you should definitely research the situation a lot more thoroughly.
Do you have immediate access to the money?
This is another important question to ask when considering whether it is the best time to buy your second home. Experts suggest being very cautious if planning an investment in a second home. Many of them are adamant about not taking out any loans and mortgages for this kind of purchase. The reasoning is that it is risky and makes your future uncertain for little payback. Even if you are planning on flipping it and selling it or renting it to cover the mortgage payments, chances are that things may not go quite as planned. Your best bet is to do it only when you have real money to invest in it.
In addition, you want to be able to cover maintenance, as well as any emergency expenses. This should be considered when buying the property as well. Besides an emergency fund and upkeep, you’ll also need to pay taxes and homeowner’s insurance.
Are you ready to give up travel?
One of the disadvantages of owning a vacation home is that you will probably end up going there every vacation, this will probably mean you won’t get to travel around anymore.
Bear in mind that no matter how heavenly an area seems at first, you might soon get tired of it and wish for a change of scenery. This can be particularly burdensome if your plan was to retire in the same place. In this case, it can even start feeling suffocating or like you are stuck with the property. Definitely make sure you carefully weigh all of the ups and downs of the property before making the final call.
All in all
Buying a second property is a serious business. The right time to invest in a second home depends on many different things. If you’re still interested in it, you should do the math first and see how feasible it would be for you. Once you’ve taken care of that, think about how you would like to use it and do your due diligence when picking the property.
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