There are a lot of things to consider when buying a second home. For instance, will you use the home exclusively, or will you rent it out for tourist season? Did you know income-tax rules are different for second homes and rental income? Did you know some homeowners’ associations have rules prohibiting rentals?
This leads me to these financial questions you need to be able to answer if you’re considering buying a second home.
How much will it cost? It’s not just the sales price, but there are other costs associated with it such as maintenance, insurance and property taxes, which can be more expensive than a first home since you can’t get a homestead exemption on a second home.
Calculate the bills. While it may be a fun getaway, do you have six months of mortgage payments reserved for an emergency? If you lost your job, could you make your current and second-home mortgage payments?
Are you buying it for the right reasons? How much time will you spend there? How much vacation time do you have? How often will family members use it? Do the math and compare it to the cost of travel, hotel rooms and meals. However, if you’re buying it as an investment in an area that is appreciating, or you plan to retire there, that’s another story.
Can you find hired help? If a second home is far away from your home, and it needs repairs, then are there contractors available to help in a pinch? In some more remote areas, handymen are either hard to find, or more expensive.
Ask about weather-related conditions. If located near a river, lake or shoreline, will flood insurance be required? Check the history of weather-related occurrences over the last decade because it will also increase the cost of insurance. Not to mention the downtime to make repairs.
Whatever you do, don’t rush into deciding. Take time to find a property you really want and do the math. Of course, if you need a mortgage to buy that second home, let me know. Florida Mortgage Firm is an Equal Housing Lender, NMLS #289323, NMLS #294701.