June 14, 2023
If you have the disposable income to buy a second home, then there can be many reasons why you might decide to make the move. Whether it’s to have easier access to skiing and the great outdoors, to be closer to family, or to have an investment property that you can rent or sell later, a second home can be a wise financial move. It’s also a purchase to think about carefully as you weigh the pros and cons. If you are trying to decide if you should buy a second home, here are some factors to consider.
Assess where you want to be
As with any home purchase, knowing where you want to be is a key first step in deciding on the home you’ll buy. If it’s for a vacation, then you’ll want to assess how often you plan on visiting the city you’re choosing, such as Mammoth Lakes, and how much you might spend on a rental, if you didn’t own a home. If you are already visiting the same place year after year, then it can be wise to consider buying a property that can be your own. Before deciding to buy, you may want to spend time in the neighborhood where you are considering buying a home as a renter, to see if it’s the right place for you.
Study the tax implications
If you’ve owned a home for many years, then you are already familiar with how taxes and homeownership are linked. However, a second home has different tax implications than your primary home. For example, for a vacation home to qualify as a second home, you must use it for at least 14 days each year, or 10 percent of the total days that it’s used as a rental. Mortgage interest rates for a second home may also be lower than those for an investment property. Income that you make from your rental property will also need to be reported on your taxes. Talking to a financial advisor and your accountant to discuss the implications of buying a second home can help you decide if it’s the right move for you.
Research the market
Real estate markets are constantly in flux and unless you have an urgent need to buy a second home, studying the market before making a decision can help you act at the best time. Talking to a professional agent who knows the market can also explain how it’s trending and which homes might be the best fit. A local agent is your best place to start for understanding the market environment. A local agent knows which properties allow nightly rentals, an estimate of what gross rental income could be, what is included in the monthly HOA and much more. Looking at home listings and researching homes and historical real estate data can also help you assess the best time to buy. Most agents should be able to provide some historical information like our Mammoth Lakes Market Update (published monthly)
Consider total costs
The appeal of a second home, especially if you are thinking of it as a vacation home, may be that you won’t have to worry about renting a place in your favorite getaway destination, and could save money. But the purchase price isn’t the only expense of a vacation home, there are also other costs to consider, such as maintenance, snow removal and hiring a property manager if you don’t have the time to look after the property yourself. In addition, condos have monthly Homeowner Association (HOA) dues.
Buying a second home can be a wise investment but before you make this major purchase you’ll have to assess the best home that will fulfill your financial goals.
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