Buying a second home for vacation or rental purposes comes with several benefits. A home away from home is a great way to escape south for the colder months of the year, and can be a special place to make memories with your family. It can also come along with some great tax benefits and cash flow opportunities. But, it’s not for everyone. Here are our top tips for buying a second home, as well as everything you should consider throughout the process.
1. Decide if it’s the right investment for you.
The first step is to determine whether buying a second home is the right decision for you. Consider the timing – is it a good time to get into the market, can you get a good deal, or are prices skyrocketing?
More importantly, do you have the necessary financial capital to invest enough in your property that you will be cash flow positive, and not relying on rental income which may come and go?
If you’re simply looking for a vacation home and not an investment, it may be more cost-effective to rent. This also gives you the flexibility to try out different places year after year, instead of returning to the same property. When you buy, you’re tied to one property and may feel obligated to go there over exploring new cities and countries.
2. Pick the right location.
Next, decide on the location for your property. You might be emotionally tied to a specific location already, but make sure you consider all the factors before sealing the deal. Take a look at the weather year-round, as this may have implications for when you’ll want to (or be able to) travel to your property, as well as what kind of insurance you’ll need to cover potential damage from extreme weather like hurricanes, floods, etc.
Speaking of travel, how expensive and arduous is it to get to the location? Consider how costly it is to pay for air travel, gas, and other expenditures, as this will cut into your bottom line.
If you’re planning to rent out your property for most of the year, also consider how close it is to desirable amenities. When renters are looking for a place to stay, they want to be on the beach – even a 5-minute walk away can be too much of a detractor.
Finally, if you’re really unsure if a location is desirable and want to get a feel for it, test it out yourself by renting in the area first.
3. Calculate every last penny of cost.
Remember that when you buy a property, it’s not just the sale price that you’re paying – there are a lot of hidden costs that come with the purchase and maintenance of a home. Do your due diligence and research the cost of all taxes, insurance, maintenance, and utilities that will come with the home, taking into consideration the regulations of the country you’re purchasing in.
Once you have a ballpark, inflate the numbers to cover any worst-case scenarios. Make sure you’re comfortable with covering all of those costs, and adjust your price range accordingly if needed.
4. Consider all the in’s and out’s.
Aside from costs, there are plenty of other things you need to think about when buying a second home. Different countries have different laws for rental regulations, so make sure you’ll be able to use the property how you like in accordance with local laws.
Also consider what type of home you can afford or would like to buy. Buying a detached home might seem like a dream, but requires much more maintenance year-round. A condo or townhome has less space and privacy, but is a little more hands-off.
Generally it’s recommended to steer clear of timeshares, which are hard to re-sell. Land-only purchases are also something to be wary of – building a custom home might seem like the perfect way to get what you want, but the costs of bringing in materials may be harder and much more expensive, especially in remote vacation spots.
Appreciation rates are an important piece of the puzzle as well. Make sure you’re buying in a location where the value of the home type you’re interested has appreciated over time in order to protect your investment.
5. Work with an experienced agent.
Finally, when looking for a home, work with an experienced agent who has local expertise, and ideally one that has experience buying and selling rental properties in the area. They should be able to give you the best advice and tailor their recommendations to meet your specific needs and goals.
Looking to buy a second home in the Okanagan? We can help with that – give us a call to speak to one of our area specialists at 250-864-HOME (4663) or contact us today!
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Featured photo by Ales Krivec on Unsplash