Whether you want an investment opportunity or want a vacation home, you might want to consider buying a second home. However, there are some differences from buying your main residence.
The first consideration when buying a second home is to consider the purpose of that real estate purchase. Will you be renting it out or letting a friend or family member live in it? Or will you be using it as a weekend getaway? Is it a long-term fixer-upper you plan to retire in? This is important to think about before you buy the second home because each possible purpose has different tax breaks. For instance, you might be able to deduct the mortgage interest you pay for or even the property taxes you pay for that property on your taxes. Also, if you rent out that second home, you need to report that income to the IRS.
Another consideration is how you plan to finance this purchase. You might consider buying a second home with equity from your first, or refinance your current home to help you have money for a second home. Or perhaps you save money to buy a much smaller and more affordable second home with cash and don’t carry two mortgages. Outside of a possible mortgage, you have to consider extra expenses like upkeep or even renovations you need to make. Perhaps you might go into an investment of a second home with family member or friends, especially if it can be used as a type of time-share. Or perhaps it can be a home for an adult child or other relative to maintain and live in, helping to off-set some of the costs of keeping a second home.
Since a second home is often not the primary residence you might have, consider what kind of property you want to buy. Perhaps it is a vacation property, and what matters most is location. Or perhaps you want to buy land in which you slowly build on. You might consider areas where you might want to retire, or where you eventually want to move to in order to help you decide on where to buy a second home. It may not be a single family either. In some situations, you might want the second residence to be a condo. If this is the case, look into HOA issues and what the rules are. If you are considering this second home to be an income property, consider what rules for the residence about renting.
