For many people, the thought of buying a home is stressful and overwhelming. However, once you have made that initial purchase and you have gone through all of the steps, the process gets a bit easier.
In fact, buying a second home is a great way to invest your money into something that will have a healthy return.
Whether you are looking for a vacation home that you and your family will visit a few times per year or you would like to purchase a second home to rent out as an investment – buying a second home is a definite possibility with the right planning!
Here are a few steps to determine if you are ready to make that large purchase … for a second time:
Check Your Budget
Before you even start looking around for a second home to purchase – you need to know if you can afford it.
Taking out a mortgage on a second home is a little bit different than when you did it for your first home. Some mortgage companies may charge you more interest on the loan for your second home.
Also, there are things like the insurance, property taxes, and maintenance costs to consider. Not to mention unexpected charges like a busted water heater or a deck that needs repair.
If you plan on renting your home out – you will want to consider the cost of the property management company who will help to protect your investment.
All of these things must be considered long before you even start the process of shopping for your second home.
Location, Location, Location
Once you have decided on how much you can afford, you want to be thinking about how much is it worth?
In other words, how much is it worth to you to have a second home that is 3,000 miles away that you can only visit once per year.
Rather than a home that is just 500 miles away that you can get to every other weekend. The location of your second home is less about the ideal spot on the beach and more about the proximity to your residence.
If you are shopping for a second home as a rental investment – the location is important because some cities have a higher cost of living than others.
In other words, your 3BR rental home will fetch a lot more rental income each month in Los Angeles than in Poughkeepsie. The same goes for the various neighborhoods here in Las Vegas – some will yield more in rental income than others.
What About the Insurance?
When you are figuring out the budget for your second home purchase – don’t forget to contact your home-owner’s insurance and ask them about adding a policy for a second home.
While having two policies with one carrier might qualify you for a discount – the location of your new home influences the rates of the policy significantly.
If your second home is in a location that is prone to flooding or some other type of natural disaster – the cost of the policy will be high.
Even if your second home has a swimming pool that is not gated or fenced – the insurance policy will be higher or could even be denied.
Purchasing a second home is a very real possibility for many people. This is a great way to make a sound investment for your family’s future. A vacation home provides plenty of opportunity for spending quality time together and a rental home offers extra income and financial stability.
Make sure you take note of these considerations when you are looking to buy your second home and keep the process low-stress and simple.