Whether you’re thinking of buying a second home to use as an investment property, vacation home, or a place where you can eventually retire, there are many things to consider.
You could be thinking about whether or not it’s an extravagant purchase, or if you’ll be able to afford a second mortgage and additional maintenance costs that come with owning a second home.
To help you out, we’ve prepared a few helpful tips as well as important things to keep in mind when buying a second home.
Take a closer look at your reasons
Most real estate experts will tell you to think carefully about your plans to buy a second property before you take the leap.
- Reexamine your goals – Buying a second home is typically for investment reasons, vacation enjoyment, or a little bit of both. Whatever your reasons are, being clear about why you’re considering a second home in the first place is something that will help you during the buying process.
- Look for areas with consistent appreciation rates – Never bank on renting out the home to cover your expenses. Look at your second home as an investment, and look to buy in areas that have steady appreciation rates.
Deciding whether a second home purchase makes financial sense
Whether you’re buying a second home for investment reasons or as a vacation property, you want to be sure you’re making a sound financial move. Many second home owners realize later on that the property – along with ongoing expenses – end up costing them more than what they expected.
To make sure you’re financially prepared, you can tally up likely expenses and factor in any additional costs that you’ll deal with when you’re not at the property, such as hiring a management company and getting hazard insurance.
After making a list of expenses, start building up your cash reserve to cover the amount, making adjustments when needed. If part of your plan is to rent out the property, take a look at how much rental income you can expect, and factor this in with your monthly costs.
What to look for in a second home
After you’ve reassessed your reasons, it’s time to do some research and look for an ideal property in the right location that fits your goals.
- Try the home first – When looking for the right location, especially if you’re after a vacation home in an area you’re not really familiar with, you may want to rent it first for a short stay. Take a closer look at factors such as travel time to the property, how often you plan to use the home, and the expenses required to own and maintain the home.
- Explore the area – Try to visit the area during different seasons to get a feel of what it’s like year-round. Visit some of the nearby attractions, entertainment venues, restaurants, and shopping centers. Ask yourself if the area has enough activities and destinations you enjoy to keep you interested. Looking for information on its public school system is also a smart idea – even if you have no plan to have your kids attend school there, homes in areas that have top-quality schools have more value.
- Get info on existing renting rules – If part of your plan for a second home is to rent it out, you’ll need to do additional research on established rules for renting in the area. For example, there are some communities that allow only monthly rentals, and not weekly vacation rentals. This also applies even if you’re just after a nice, quiet vacation home, as you’ll want to avoid vacationing in an area that has a high rental turnover.
- Interact with the locals – Getting to know the area through the perspective of a local can help you decide whether or not you want to buy a home there. Talk to some of the current residents and find out what they love about living there, what it’s like during the off-season, if they’re expecting any significant changes soon, and other things you need to know before making a decision.
Working with an experienced realtor
Knowing the long-term or resale value of a property is essential when buying a second home, which is why it is important to work with an experienced real estate agent. Your agent will be able to provide you with sales histories of comparable homes, information on recent sales, and potential resale options for your targeted home.
An experienced agent will also provide information on neighborhoods that match your lifestyle, pros and cons of a particular property, nearby amenities, updated market prices, weather information, and other valuable information.
Work with the best Los Cabos, Mexico real estate professional today! Get in touch with Andrew Lemke at 310.922.1818 (US) or 624.122.5658 (Mexico). You can also send an email to andrew(dotted)lemke(at)engelvoelkers(dotted)com