Buying a second home is a great way to get into the investment property market. Historically, property has proven to be an effective long term investment, and if you find you’re in a position, either through sound financial management or even through the increased equity in your primary home, buying a second home can be a fine strategy to increase your asset base and wealth. As with all major investments you need to do your due diligence, so plan on thoroughly researching your decision, speak to your financial adviser, your accountant and your real estate investment experts. Buying a second home should not be an investment decision made lightly.
A crucial thing to think about when buying a second home is how you intend to use it.
Are you buying it for purely investment reasons, or will it be used as a retirement or holiday house. Each of these options may imply different financing strategies, not to mention different taxation implications. Again proper planning and due diligence come into play.
If you are buying a second home for your personal use such as a holiday house, then you will most likely be house-hunting to a different set of criteria then if you were purchasing for investment or rental returns. You may want a certain location and set of features based around your vacationing needs. While buying a second home as a rental investment may require you to look at particular socioeconomic locations where the demand for rentals is high.
Again the different reasons behind buying a second home may affect many things in relation to the buying process. Things such as different financing and mortgage structures, different interest rates, and different taxation structures. Some investors may want a kind of kind of “hybrid” arrangement whereby the second home will be rented out at certain times of the year and vacationed in at others, with the longer term plan to move into it as a retirement home. The financial and tax implications of each investment strategy when buying a second home will definitely require expert advice.
With these longer term planning decisions made you can enter the market for buying a second home with your eyes wide open. The process from that point on will be similar to any home purchase – finding a structurally sound home, with the features and fittings you want, in a desired location, at a reasonable price.
