Buying a second home can be an emotional or practical decision\u2014and often, it\u2019s a bit of both.<\/p>\n\n\n\n
You may take an annual vacation<\/a> with family or friends and decide it\u2019s time to have a permanent place to stay. Perhaps you\u2019re looking for a new income stream from a rental property<\/a>. Or, you have a parent who is financially strapped and needs to sell their home, but wants to live in it until they pass.<\/p>\n\n\n\n Another home may even be part of your long-term plan as it can provide rental income in the short-run and a place to retire to in the future. But it\u2019s never a good idea to rush into such a large decision. Here are a few of the questions you\u2019ll want answers to before moving forward.<\/p>\n\n\n\n The first question\u2014why\u2014is the most basic. It\u2019s also one of the most important as the answer can drive many of your decisions.<\/p>\n\n\n\n Sometimes it\u2019s clear, such as a parent asking for assistance. But you could be feeling pressure when friends are buying second homes or because you think you should be exploring new investment opportunities<\/a>.<\/p>\n\n\n\n Try digging a level deeper and considering all the options, because big decisions often aren\u2019t so black and white.<\/p>\n\n\n\n Not to say buying a second home is a bad idea, but be sure you know your why.<\/p>\n\n\n\n Focusing on investment and vacation properties, consider the location and type of home as you weigh your decision.<\/p>\n\n\n\n A single-family house can give you the freedom to make modifications and upgrades as you please, but you\u2019ll also be responsible for all the property upkeep. With a condo or co-op, you won\u2019t have to worry about the shared spaces, but you\u2019ll have to pay dues and be restricted if you want to customize the home.<\/p>\n\n\n\n As for location, you\u2019ll know what makes sense when it comes to vacation spots for yourself. But consider whether you might want to occasionally rent it out through home-sharing apps and services. Even if you need to hire a property manager, a vacation home that breaks even could be a great purchase.<\/p>\n\n\n\n When you\u2019re looking for a pure investment property, factors like the school zone and walkability score may be more important than the distance to the beach. Depending on where you live, you may want to start with a nearby investment home that you can easily keep an eye on throughout the year.<\/p>\n\n\n\n Managing a second home can be a lot more work than people first think. While vacation homes can be left unoccupied for much of the year, you still need to pay for upkeep. Depending on the location and when you use the home, also consider if you\u2019ll need to prepare the house for changing seasons and natural disasters.<\/p>\n\n\n\n With a rental, you could personally<\/a> take on much of the work if the home is nearby. Alternatively, you can outsource the work by hiring either an individual property manager or a property management firm.<\/p>\n\n\n\n For a fee, you\u2019ll be able to free yourself from having to deal with contractors, upkeep, and finding tenants. If you can still come out ahead after the fees, you\u2019ll have a nearly passive form of income.<\/p>\n\n\n\n You might already be daydreaming about the numbers, but determine the realistic expenses<\/a> (and potential income) to determine if another home is feasible. A second mortgage, homeowners insurance policy, repairs, and maintenance can add up quickly\u2014and some of these may be more expensive on a second home.<\/p>\n\n\n\n For example, you may need a high down payment (such as 20% to 30%) and good enough credit to qualify for a conventional mortgage as government-backed mortgages may only be an option for primary residences. And if you\u2019re still paying off a first mortgage, that will affect your debt-to-income (DTI) ratio, which can impact your ability to qualify for a mortgage and the rate you receive.<\/p>\n\n\n\nWhy Are You Buying a Second Home?<\/h2>\n\n\n\n
What Type of Home Do You Want?<\/h2>\n\n\n\n
Will You Have to Hire a Property Manager?<\/h2>\n\n\n\n
How Much Will This Actually Cost?<\/h2>\n\n\n\n