The biggest financial investment one makes in their lifetime is to buy a place of their own. Having a home of your own is always a better option than paying rent to someone else.
But what about investing in a second home? Is it worth it?
Like every other financial decision you make, it completely depends on your personal preferences, financial situation and long-term goals, among others. Take a look at these 5 attributes you need to factor in before you take the plunge.
Location is probably THE most important factor to consider in real estate. If you choose a poor location, you cannot go back.
Now, when you think of buying a second home you need to know what purpose the new home is going to serve. Are you looking for a vacation home? Or are you looking at it just as an investment? You need to have an answer ready BEFORE you zero in on the house. Once you are prepared with that answer, shortlist a few properties that you like and find out everything you need and should know - it should give you a fair idea of the property in question in order for you to make the right decision.
Are you absolutely sure that you can buy a second home? If yes, are you willing to give up on things that you might be able to do had you not bought that second home? It is extremely important to ask yourself these questions.
Any investment in real estate is long-term. Buying or selling of property is not a cakewalk so you need to be wise when you decide to invest in real estate - in this case, a second home. So, you need to prepare yourself very well financially, factoring in all the costs that you need to bear presently as well as in the future, keeping all the calculations ready. Only then can you begin to think of buying a second home.
Point to remember - always secure your future before investing, especially in real estate.
Let us assume that you do not have enough finances lying around to buy a second home – you are going to need a home loan. Again, there are a lot of things to consider before opting for a home loan. Are you eligible for one? What is your credit score? Will you be able to pay off the loan in the stipulated time without compromising on your financial security?
Once you are confident that you will be able to fulfil these conditions, only then should you go ahead.
After all the research, phone calls and visits, if you choose to make your second home a vacation home, you can close in on a property that is a reflection of your lifestyle. You can design and decorate the place the way you like. You can drive up to the place any time you want and enjoy your time there before you head back to the grind.
This is definitely an important factor to consider before buying a second home.
In case you decide on buying a second home just as an investment then you can rent out the place – a brilliant way to break-even on the amount it took to purchase the house. Whether to rent out the house for short-term or long-term will depend completely on what you decide to do with the place eventually. If it is a home that you would like to visit upon retirement then you can think of renting it out for a longer period of time.
Renting out a place also keeps the space occupied, instead of gathering dust.
Now that you know what goes into buying a second home, you can put some real thought into it and plan accordingly.