Thinking of a 2nd home??

Whether you’re interested in buying a second home to use as a vacation home, investment property or place to retire to in the future, there are some questions you should ask yourself before you begin.

 Is buying a second home a good investment?

It's a good idea to consider a second home – for personal use or investment purposes – simply because houses will continue to appreciate in many areas of the country for some time. And, if you want that getaway all to yourself but find you can't afford the mortgage payments after you buy it, go ahead and rent it. The tax laws have changed how we look at second homes. The getaway that was once viewed only as a luxury is now not a bad place to stick your savings. And in a few years, you may even be able to retire into what has become the best investment you ever made.

What factors may affect the value of my second home?

If you are purchasing a second home with resale as your primary objective, you should keep the following factors in mind:

Ø      A property located in driving proximity of a metropolitan area will have greater sales potential when it’s time to sell.

 

Ø      A property convenient to shopping, restaurants and local attractions will be more desirable than a more remote location.

 

Ø      A property that is located closer to recreational activity sites will be of higher value (i.e. water, mountains, golf, etc.)

 

Ø      An area that offers recreational activities during more than one season will appeal to a wider selection of potential buyers.

 

Ø      An attractive, well-maintained property in a high-quality neighborhood or development is always easier to sell.

 

Ø      A property with a good rental history will be more desirable to a buyer with investment potential in mind.

 How do I choose the right location?

While climate will help you determine which region of the country you choose, your interests should be your primary guide.  For instance, do you crave boating or playing golf in the summer sun or may be the beach is most important?

Clarifying those interests is the first step in deciding where to buy. If you can come to a clear understanding of why you’re making this purchase, what type of relaxation activities you prefer, and what your ultimate goal for the property is, then you can narrow down your location choice.

You should also think about the amount of time you plan on spending at your second home.  Will you visit every weekend, just a few times during the year or seasonally?  This will help you determine how far you are willing to travel.

 What type of property is best for me?

Once you’ve determined the location, you then decide on the type of property that will best meet your needs.

Ø      Single-family – From a rustic cabin to a waterfront mansion, the selection is endless.  Single-family properties typically offer more privacy and fewer restrictions than attached housing or planned-unit communities.  However, they are also typically more expensive as well.  The homeowner is also responsible for exterior maintenance and landscaping.

 

Ø      Attached housing – From a studio condominium to a luxury townhouse, the choices vary here as well.  With an attached property you usually own your particular unit and share ownership of the common areas with other homeowners in the development.  Monthly association dues are customary to cover the cost of exterior maintenance, taxes, fire insurance and reserves for future repairs.

 

What are my financing alternatives?

Financing a second home is similar to financing your primary residence.  A lender will evaluate your credit history and rating, debt-to-income ratios and verify your employment and bank deposits.

All lenders require the borrower to have a source of income that covers repayment of the debt and allows adequate funds for expenses relating to the use of the property.

Another thing to consider is if you plan to purchase a second home on your own or possibly share the expense with other people you trust and enjoy.  Having two or more families, couples, or individuals combine their assets and purchase the property as partners can make sense, especially for people that enjoy being together yet know they will never be able to afford a getaway of their own.

  What tax benefits may be available to me?Second home ownership may offer certain tax advantages depending on the use of the property.  In the U.S., interest and property taxes on second homes are generally tax-deductible on your Federal income tax, and certain other rental expenses may be tax deductible as well.

Tax rules and regulations change frequently, so you should consult with your tax advisor prior to purchasing your second home.

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