Deciding to purchase a second home is just as big of a decision as it was when you bought the first one, only now you’ll have two mortgage payments each month.
The best idea is to make sure you have a plan to pay for it all before you ever take the first step forward. Though you may not currently see all the options you have regarding the purchase of a second home, you can easily be enlightened.
Take the time now to read through a brief look at a few things you should consider before investing in the purchase of a second home.
Consider your motives for buying
The reason why you want to purchase a second home has quite an influence on whether or not the purchase is sound. You could be purchasing a second home to serve as a vacation spot.
You could be purchasing a second property simply for the investment opportunities. Renting out your new property could help make the mortgage payments even easier to maintain.
Get to know the area before purchasing
Before you ever consider purchasing a second property, you need to thoroughly vet the area in which it sits. The neighborhood and surrounding areas dictate the value of a property.
If you’re looking to make an investment for a profitable turnaround, you’ll need your second property to be in a prime location. Spend time researching the development in the area.
Check out what the place might look like in five or ten years. You may want to purchase now (when the price is low) and hold the property for a while to boost its value.
Shop around for a good mortgage rate
After purchasing your first home, you likely know enough about grabbing up a solid mortgage rate to take the time to shop around for the lowest rates. You never know what you’ll find, and the fluctuation in pricing is worth the time spent doing the research.
Don’t forget extra expenses
Just as you likely experienced when you purchased your first home, there are costs other than the actual mortgage to consider.
You’ll need to purchase the proper insurance policies to protect your investment in the event of a fire, flood, earthquake, theft, and other chaos. It’s also wise to set aside at least two percent of the total value of the property for yearly maintenance costs.
Cash in on your tax incentives
If you’re purchasing a second property merely for the rental income, you’ll have to report that income on your taxes. However, you’ll also be granted the opportunity to claim expenses like maintenance and cleaning of the property for a deduction.
On the flipside, you could rent your property out for a maximum of two weeks per year without having to pay taxes on the rental income.