Things to Consider When Buying a Second Home

Owning a second home gives many families the ability to have a home away from home. While the idea sounds appealing, there are a lot of responsibilities to owning a second home that many people fail to realize beforehand. From paying taxes on the property to renting it out when you’re not using it, you have several things to think about if you’re considering buying a second home. 

1. The Full Financial Impact

Owning a second home means you’re responsible for double the costs. If your first home isn’t paid off, you’ll have two mortgages. Then, there’s double the homeowner’s insurance, double the utility bills, and double the maintenance costs. If your septic fails in your primary home at the beginning of the month and then the HVAC system breaks down in your second home later that same month, that’s two big bills you’ll need to pay one right after the other. Can your bank account and current income support the added financial strain?

2. The Long Haul

Purchasing a second home may negatively impact your ability to travel to other locations. While the home seems like a great place to visit in the beginning, it could become boring and “old hat” after a few years in the same old vacation spot. If you love to travel and see new sights, owning a vacation home may not be the right choice for you. 

3. Renting Out a Second Home

Renting out your second home when you’re not using it is a great way to help pay the mortgage on it. That said, renting out your vacation home comes with rules and regulations that might make it more of a hassle than it’s worth. 

Your state, county, and even the neighborhood where your second home is located may have laws and regulations regarding rental properties, so you must do your homework to be sure you’re abiding by them if you plan to rent your vacation home out. You may find that it’s much cheaper and easier to just rent a home when you want to get away instead of entering the world of landlord and vacation homeownership. 

4. Income Taxes

For tax purposes, your vacation home will be classified as either a personal residence or a rental property. Specific tax deductions apply to both, so you’ll need to figure out which classification your second home falls under when doing your taxes. Your best bet is to hire a tax professional to figure out your taxes, so you know they’re done right. 

5. Real Estate is a Dicey Business

Many people make the mistake of thinking that real estate is a safe investment. While it is a great way to increase your profit and save for retirement, there’s always a risk. If you’re thinking of purchasing a second home because it’ll be a good investment, keep in mind that no investment is guaranteed, and you could end up losing out if the market tanks. 

There are many good reasons to own a second home, but there are just as many reasons why it might not be such a good idea. If you’re thinking of buying a second home, be sure to consider the things listed above first.