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What to Consider Before Buying a Second Home
Have you ever been on vacation and wondered how delightful it might be to have the chance to live in that locale, even part-time? The tangible next step in this realization could be looking at a local real estate guide and checking out the neighborhood information. Before you know it, the idea of having a second home could take root. But before you go any further, consider these tips for a smart investment.

Evaluate your needs and long-term goals.
Be realistic about what type of second home suits your lifestyle. If you’re looking for a weekend getaway, staying within a day’s drive of your primary home could be a good move. If you’d like your second home to someday serve as a retirement spot, assess the home’s accessibility and check out health care services in the area. 

Get to know the area before buying.
Even if you’ve been visiting the same vacation spot for years, you need to get to know the area from a non-tourist perspective if you plan to buy there. Visit the place off-season and talk to locals to get their take on the area. 

Decide what type of home is right for you.
Think about how much time you’re willing to devote to maintenance when deciding between a condo or a single-family home. Condos are a good choice for buyers who only plan to use their homes occasionally and don’t want to deal with year-round maintenance. But if you don’t want to sacrifice privacy, you may want to stick with a single-family home.
 
Hire a local real estate agent.
Buying a vacation home outside your area can be tricky, as residential real estate is extremely localized. A local agent can help you get to know the market. Check online real estate listing sites and see which agents have the most listings in the area or price range you’re considering.

Calculate expenses.
In addition to the mortgage, don’t forget about insurance and maintenance when adding up the costs of your second home. Some of the most desirable areas in California, for example, are at a higher risk for natural disasters. Get several insurance quotes before making an offer. For maintenance, a good rule of thumb is to set aside two percent of the home’s value per year for upkeep and repairs.

Consider fractional ownership to cut down on costs.
If you buy a second home on your own, you may find yourself shelling out a lot of money for the amount of time you will actually spend there. By pooling your resources with friends or relatives, you can enjoy a vacation getaway for a fraction of the cost. 

Rent out your second home for extra income.
If you need extra cash to supplement your monthly mortgage payment, renting out your second home could be a good option. Being a landlord comes with more responsibilities than many people realize, so familiarize yourself with landlord/tenant laws and the Fair Housing Act before renting out your home.

Look into tax benefits.
You don’t have to pay taxes on rental income if you rent out your home for fewer than fifteen days a year, but you can’t deduct any rental expenses. If you rent out your home for more than fifteen days a year, you have to report the income, but you can deduct expenses like maintenance and cleaning.

Adapted from a blog on HGTV.com.

This material is meant for general illustration and/or informational purposes only.  Although the information has been gathered from sources believed to be reliable, no representation is made as to its accuracy.  This material is not intended to be construed as legal, tax or investment advice.  You are encouraged to consult your legal, tax or investment professional for specific advice. 

 

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