Your home is where the heart is, but what happens if you have multiple homes across the country? Well, you’re just a fortunate person. Today we are going to talk about some of the most important things that you need to consider if you ever decide to purchase a second home. So, no matter what the reason for this is, if you are currently thinking about purchasing a new property, we think that our guide will be pretty helpful to you.
Our list will contain six important factors that you should always take into consideration, so this being a serious subject, we’re going to end this introduction right here and jump straight into the content. Let’s take a look.
1. Double the costs
You are probably very aware of this, but it’s still an important factor that you should keep in mind before deciding to buy a second home. Not only that you’ll have to pay double property tax, but you’ll still have to pay the regular bills, such as water, electricity and all other costs involved. It might not sound like much at first, but it’s definitely a thing that you should keep in mind if you really want to keep your budget tight.
Even if it’s a home that you’ll only visit for vacations and during holidays, the costs can still add up quickly. Make sure that you do the math up to a cent before you close up the transaction.
2. The current state of the market
You should not buy a property if the current state of the market is not really working in your favor. Currently, due to the COVID-19 crisis, a lot of things are “messed up” on the market, so all the prices are unstable and they’re either spiking up or going down like anchors. We wouldn’t advise you to purchase right now, and even in a situation that’s not similar to this, you should always wait for the prices to shift before you buy.
We do understand that sometimes you see a really nice home and you just want to have it, but if you really care about being efficient with your budget, patience is the key.
3. Finding a mortgage opportunity
A mortgage is often something that will help you make a dream purchase, but you shouldn’t take every opportunity that you see. Some have really high-interest rates, while others have some terms that might not really work out in your favor.
However, if you are patient, you’ll be able to find the right opportunity. Thankfully, you can always visit Think Plutus if you are interested in learning some more on this subject.
One thing to remember when signing up for a mortgage is that your credit score will have a lot of impact, meaning that the higher it is, the more “bargaining power” you’ll have when negotiating. People with bad credit scores are usually being denied their mortgage requests, but we hope that this is not your case.
If you have some time in-between your next home purchase, and you’re in need of a mortgage, a good thing to do is to try and fix your credit score as much as you can.
4. You can always rent it out
Have you ever considered that your second home doesn’t have to be used by you? Especially if you are in need of money, but you’ve recently found a great opportunity for a purchase. You can grab that sweet deal while you still can, and then rent the home until you get your money back. It might take a while, but it’s a pretty good long-term investment.
This is usually a good idea to pull off in places where you know that something “big” is about to happen, such as the construction of many new schools, malls, etc…
If you purchase a home in this type of area, you might be able to up the rent by a bit when the time comes for tenants to move in. Usually, people rent for many different purposes. If it’s a villa, you can rent it for weddings, parties and all sorts of events that can net you some sweet profit.
5. Your taxes are different
With the things that we just mentioned above, there’s something very important that you should know as well. Although renting is a great thing, it’s not as “black and white” as you think. A property can be classified as either your personal residence or as one that’s used only for rentals. Here’s how it works in detail:
- If a property is rented less than two weeks in a year, it can be classified as a personal residence, and your taxes will remain the same.
- If you rent this place more than two weeks per year, it is classified as a rental property and you’ll have to report it as one. By doing this, your taxes will change. Some countries have different laws, but this is pretty much how it is in most of them.
6. It’s not the most stable investment
Last but not least, if you care about investments, and you’re doing this for that purpose, we might have to disappoint you a bit by what we’re about to say next.
According to some experts and real-estate analysts, now is not the right time to make purchases, because the market starts shifting in a very strange way, and you could be “losing” some money in a very short period.
Of course, if you are purchasing this home just because you want another place to live, then this doesn’t apply to you. But, if you are an investor, this might not be the best one on your list of options at the moment, unfortunately.
Owning a second home can be a cool thing, and whether you want to purchase one as an investment or not, there are still some things that you should consider before purchasing. However, despite the extra costs and all of the things that come along with a second home, sometimes it’s a really worthy purchase, especially if you find a great mortgage deal.