Buying a second home for leisure can be a decision most people who may have enough savings, usually contemplate on. Financial coaches say, the price of the property should not be the only financial consideration to make when buying a vacation home, as it also entails taxes, as well as other expenses.
Personal Finance expert Dave Ramsey thoroughly discussed this topic in one of his blog posts. “Roofs leak and appliances break. Are you ready to take on the added expense of maintaining a second home? A general rule of thumb is to set aside 1–2% of your home’s purchase price for maintenance and repairs. So, if your second home is valued at $200,000, you’ll need to set aside $2,000–4,000 each year for upkeep. You’ll also have to account for annual property taxes, as well as neighborhood homeowner’s association fees (HOA) if they apply.” Take a look at the whole article here.
More Factors to Consider
Finances aside, there are still a host of other factors to consider prior to inking that contract.
After finalizing that the cost of the new home can be comfortably settled, and buyers should remain focused on their objective in buying the said home. Will it be purely for vacation or leisure, Will it be rented out? If so, will it be on a short term or long term basis? Will it be a future home used after retirement? Real estate experts say the main objective should always serve as a constant guide for the buyers in determining the home that they will buy.
The Wall Street Journal has published a comprehensive news feature on the topic, and one of their tips is to remain focused on the objective for availing a second property.
“Buy it for the right reason. The Realtors association surveys find that the primary motivation for a vacation-home purchase is vacationing. And many experts think that’s the best way to approach the deal. Rental income is so unpredictable it should be viewed as gravy, they say, and buyers certainly shouldn’t rely on it to cover their mortgage and other expenses. And the market is too unpredictable to expect to profit on a sale.” The original write-up can be found here.
Location, Location, Location
Home and Garden Television has also extensively discussed the topic, and mentioned several factors that should be kept in mind by buyers of second home. In their write-up they mentioned that next to finances, location should always be a top factor to consider in choosing a property to purchase.
“According to the National Association of Realtors (NAR), more than 80 percent of vacation-home buyers choose locations within driving distance of where they live, with about half of all owners opting for properties within 50 miles of their primary residence. Proximity to your home is especially important if you plan to visit the property frequently.”
Take a look at the rest of the factors they mentioned here.
Buying a second home is not easy because it requires financial stability and commitment to the upkeep of this other property.