If you’re doing well enough financially, you might eventually consider buying a second home. Maybe you want a place that you can use as a fortress of solitude, or you’re looking to add to your investments. Whatever reasons you might have for buying a second property, there are a few questions you should ask yourself before you go through with the purchase.
1. What will this property cost me?
This might seem like an obvious question – of course you’d want to know how much it costs, right? But you’d be surprised by how many people don’t pay enough attention to the cost factor. There are multiple expenses associated with owning a home, and the cost of the property is just one of them. There is upkeep, maintenance, utility bills and potential repair charges to think about. If you’re getting home insurance, you should factor that into the cost as well.
2. Can I afford it?
Owning two houses is great, but not at the cost of your financial security. You shouldn’t purchase another property if it is going to strain your finances to the breaking point. If you have any other debts or loans you are currently paying off, you might not be able to gather enough money to buy another home. In addition, if there are some unforeseen problems in the future, you’ll have less of an emergency fund if you spend it on a new home. Wait until your finances are at a point where you can comfortably afford a second house.
3. Why are you buying this house?
Because I can, you might say. Well, that’s a fair reason, but a house isn’t a pair of shoes. If you’re primarily concerned about bragging rights and peer pressure, it may not be the best decision to make. If you really need the second home, to use as a getaway on weekends or maybe even as a potential rentable property, then you should definitely consider buying it.
4. Will you rent the property or use it for yourself?
If you’re planning to use the house for yourself, you can buy and do pretty much whatever you want. However, if you are renting the new home, there is a very specific set of rules you need to follow. For a property that you want to rent, you need to keep the home neat and clean. Regular maintenance is a must.
Keep in mind that different tax rules apply for rental properties, so make sure you consult a financial expert before you choose one of the two.
5. If you’re going to rent one of your houses, which one will it be?
When you’re thinking about giving out your properties for rent, you need to assess the market objectively. If the home you’re thinking of buying is in a low-rent zone, then you might want to reconsider the purchase. You need to make sure that the property is accessible easily and has a lot of activity spots in its vicinity – malls, theatres, departmental stores etc. if your apartment complex has a swimming pool and a gym, it will be more desirable to potential tenants. You also need to ensure that there aren’t any potential problems with the neighborhood.
On the other hand, you could also choose to move out of your current home and into the new one if you find it has more space and better living conditions. Your first home will be the property you rent out in this case.
6. Will you be your own landlord?
Managing tenants can be time-consuming and stressful. If you think you’re up to the task, you could choose to be the landlord of your own property. Keep in mind that this will require you to have constant communication with the tenant for the rent, as well as having to contact the concerned experts for regular repair jobs.
Instead, for a small fee, you could hire a property manager who can take away the hassle of dealing with all of these issues. You would just sit back, collect the rent, and use the time you save in other productive activities.
If you have the money to buy a new home – congratulations, you’re doing really well for yourself. If you’ve asked yourself these questions and come away with mostly positive responses, you should definitely consider buying a second home and increasing your asset base.