8 Questions to Answer Before Buying a Second Home

1) How much will a second home cost?

Besides sale price, you should factor in mortgage, property taxes, insurance, utilities and maintenance fees—and some of those expenses are probably higher than you think—plus up to 1.25 percent of the purchase price to cover annual maintenance and unexpected repairs. You’ll also need to budget 20 percent more for insurance than you pay for your primary residence; if you rent out your second home, you’ll also need medical and liability coverage.

2) Can you truly afford a second home?

You should only buy a second home after the rest of your finances are in tip-top shape. All of your mortgage payments—including the second home—and remaining debt should consume no more than 36 percent of your monthly gross income. If you can’t make those numbers work, this probably isn’t the right time to spring for second home.

3) Are you buying it for the right reason?

Some people view a vacation home as a way to save on the lodging fees they pay on their annual trip. But you can take pretty swanky vacations for what you’ll spend on a vacation home. It might help to view Home #2 as an investment—either as your retirement home or a property you can sell later to boost your retirement income. Research median home prices over the last 10 years to see how a property has performed historically.

4) How do you plan to use the home?

If you’re buying a second home for your own personal use, purchase one you love. But if you’re counting on rental income to cover the mortgage, be more conscious of the home’s location and appeal to renters. Also remember that different tax rules apply according to whether your second home is for personal use or if you rent it. Given the complexity of tax considerations and reporting rental income, it’s a good idea to consult with a tax professional before you decide to buy.

5) If you rent the home, is it the right property?

First, think about how often you’ll want to rent, plus how long the potential rental season will be, then calculate how much you can make per year. Is it enough to cover the mortgage, taxes, insurance and marketing for the property you’re considering? While you’re vacation-home shopping, take a look at similar properties in your area to see how active the rental market is, how other places are priced on a nightly or weekly basis, and how attractive your home will be to potential renters. Make sure it will stand out.

6) Will you need to hire a property manager?

Many people start out thinking they’re going to do all the work themselves—advertising, finding and screening tenants, cleaning, handling contracts and deposits, and regular maintenance and repairs—until they realize finding tenants and doing paperwork takes up a lot of time. Then the idea of paying a property manager 20-30 percent of the rental income isn’t so bad.

7) Is the home located in a high-risk area?

Homes located in designated flood zones or areas that are prone to other natural disasters such as earthquakes or tornadoes will cost more to insure. Waterfront homes might attract more renters, but you’ll pay more to cover them. Only you can decide if extra insurance costs, plus restoring a damaged home is worth the hassle. if you buy in a riskier area, budget for higher and sometimes unexpected costs.

8) Are you rushing into the decision?

Don’t let impulse or emotion pressure you into an unwise purchase. Do your research and sleep on any big decisions you face. Second homes are a luxury, so time is on your side when you’re ready to start looking.

Recent Articles

home inspection santa barbara

13 Things Santa Barbara Homebuyers Should Know About Inspections

If you’re not familiar with home inspections, then you might have a lot of questions about what gets inspected, how thorough the inspectors are, why you even need one, and what you can expect if you’re walking with an inspector through the house you’re hoping to buy in santa barbara. There’s a lot to know…

signs of a good real estate agent

21 Telltale Signs of a Good Real Estate Agent

Just like in any other profession, there are good real estate agents … and there are, unfortunately, subpar real estate agents, too. But how do you know if you’ve got a dreamboat or a dud handling your real estate transaction? One way to know whether you’ve got a good agent (or not) is to consider…

images1245-5c5aa32d19337-1024x683

10 Tax Breaks for Santa Barbara Home Owners

Being a homeowner definitely has its advantages, and saving money on your taxes each year just might be at the top of the list. Make sure you’re taking advantage of these common tax perks as a homeowner: 1) Mortgage interest One of the most common tax perks, you can deduct mortgage interest for your primary…

keller-williams-santa-barbara-1

4 Questions to Ask Before Selling Your Santa Barbara Home

There comes a time in every home owner’s life when he or she realizes: “I am not the same person I was when I bought this place.” Maybe your lifestyle or your family configuration has changed, or maybe the house just isn’t as appealing as it was when you signed that ream of paperwork on…

overhead view of couple moving in to new home and using wireless internet on tablet computer

5 Mistakes to Avoid When Buying a House in Santa Barbara

Buying a home can be an anxiety-ridden process, and that potential anxiety gets amplified for anyone who’s embarking on homeownership for the very first time. There’s so much to do and so much you don’t know that “being overwhelmed” hardly seems like an appropriate description of how it feels. And even though you don’t want…

daniel zia magazine cover

Daniel Zia Awarded Cover & Featured Interview In World Class Magazines

Founder of Zia Group, Daniel Zia, was awarded the cover and featured interview in World Class Magazines. Below, you can read the complete article written by author Katrina World. Focus, appears to be fundamental to Daniel Zia and his Zia Group’s business strategy. Zia surrounds himself with a stellar team of eight, each centering in…