Is Buying a Second Home a Good Idea?

Owning a second home is an exciting accomplishment, but what should you consider before purchasing an additional home?

A family enjoying their vacation home

Perhaps you've always dreamt of owning a second home. Maybe you've wished for a beach getaway, a mountain escape, or somewhere to settle down and retire. Before deciding to make your purchase, consider the benefits and drawbacks of owning a second home.

Benefits

  • A second income: Owning a second home means you now have a property to rent! With the rise of rental apps such as Airbnb, renting your place is easier than ever. You can use the generated income to subsidize your mortgage or have another income source if you have consistent renters.
  • A place to vacation: Spending money on vacation rental properties can be pricey. Having your own destination to head to when the holidays roll around can save you money. Not to mention, having a set location for vacations can bring new memories and sentimental value to the home, which are priceless.
  • Potential appreciation: Consider closing costs, maintenance upkeep, and rates of return when looking at a second home as an investment property. Your home might appreciate over years of ownership. A home's appreciation relies on the housing market, location, interest rates, and home improvements. The average appreciated rates are around 5%, but that doesn't magically happen. Improvements and renovations are a must to get a house out of constant depreciation.

Drawbacks

  • Initial purchase cost. Purchasing a second home can be pricier than expected. Not only do you incur the cost of purchasing the home, but you also have to pay other fees. These can be appraisal and inspection fees, closing costs, and you'll also likely need to furnish the home. Furnishing the home with everything from furniture to linen and dishes can exceed 25 to 33 percent of the purchase price - Yikes!
  • Difficulty finding renters. Owning a second home is great when you have the availability to be there, but what about when you aren't using it? Hopefully, you can find renters, but it takes time and money to market your property and select the right renters. Every day your property sits empty is a loss of profit, so you could have to pay your mortgage if you are unable to find tenants.
  • Maintenance and upkeep. Taking care of a home can be expensive. Unexpected problems, routine maintenance, and upkeep all add to the cost of owning a second home. If a pipe bursts or appliances break, you will have to contact a repair company, schedule appointments, and meet them at your second home. You may spend an entire trip working on the property. You can decide to hire a property manager for when you are away, but this will be costly.
  • Distance. Purchasing a home that is hours away or across the country may not be ideal for weekend getaways and quick trips. If you are planning to purchase a home that is a far distance away, plan longer trips less frequently to avoid high travel costs.

By carefully weighing these factors, you can make a more informed decision about whether owning a second home is the right choice for you, ultimately enhancing your lifestyle and financial well-being.

The information provided in these articles is intended for informational purposes only. It is not to be construed as the opinion of Central Bancompany, Inc., and/or its subsidiaries and does not imply endorsement or support of any of the mentioned information, products, services, or providers. All information presented is without any representation, guaranty, or warranty regarding the accuracy, relevance, or completeness of the information.