Owning a home by the beach or close to the mountains in addition to a primary residence is the aspiration of many homeowners. While the visions of what fun you and your family will have at this second home may come readily, the many financial implications of that property may be a little more difficult (and certainly less fun) to conjure. Before you purchase a second home and think about renting it out, there are a few things that you should consider.
Why do you want a second home?
The first question to ask yourself is what your purpose in buying a second home is. Do you want it for the memories or are you thinking of it as more of an investment property? The answer to that will bring up a list of follow-up questions.
Many people purchase second homes in places that they enjoy visiting frequently. Doing this has the potential to save on rental costs, and that second home can become a place to retire later in life. For example, if you are already making frequent trips to Seabrook Island during the summer, that’s a prime place for a second home.
With that said, do consider if the purchase will compromise your ability to travel to other places and if you’re ready for the responsibility of having a second place. If you only want to take a beach vacation a couple times each year, there may be easier and less stressful ways of doing that than buying another home.
If you want to purchase a second home for investment reasons instead, take a hard look at the housing market and all of the expenses that will go into maintaining the home or getting it ready to flip.
Are you prepared for the maintenance involved?
When you have a second home, you have double the maintenance cost, and sometimes even more. Once you make your purchase, you will now have two roofs to think about, a second set of appliances, HOA fees, utilities, insurance, lawn maintenance, and more.
Just like in your primary residence, you have to budget for the unexpected. Appliances can and will break down, so it’s a good idea to have a separate emergency fund for each property that you own.
Where are you in your financial goals?
While every buying situation is unique, it’s generally better to be financially stable with your primary home and your other financial goals before you think about taking on another mortgage payment. Will the purchase squeeze your ability to save for retirement or your family’s education? Have you paid off your credit cards or other high-interest debt? Taking on another home may be too much to handle if your other financial goals are not on track.
Vacation property is treated differently than a primary residence. Read up on the most recent legislation on what items you can and cannot deduct on your taxes for rental properties.
Can you handle renters?
Having a property for your personal use is one thing; having renters is a whole different story. If you know that you want to rent out your potential second home, you should check to see if there are renting restrictions at the city and community level before you make the investment. Some places will impose minimum rental periods, while others will not allow you to use services like Airbnb or Vrbo.
In addition, having anyone except your family in your second home will mean relinquishing some control over what goes on inside of it, especially if you are not living nearby your second property. Even if you call references and do a background check on potential renters, you won’t always know what to expect. Hence the importance of a second emergency fund.
Should you buy that second home you’ve been eyeing?
If you have gone through all of the above and you feel that you are in a good position to buy a second home, by all means, proceed. As you conduct more research, you will likely have more questions. Check in with yourself and others who may be involved in the decision throughout the research and purchase process to make sure you are still feeling good about the idea, and if you’re thinking about purchasing Seabrook Island real estate for your second home, reach out to one of our real estate agents.