Buying a vacation home or investment property is not only an excellent way to expand your portfolio, but it’s also an excellent option if you want to enhance your lifestyle. Of course, purchasing a second home is not right (or even feasible) for everyone and is not a decision you should make lightly. If you’ve considered investing in Brookwood Hills real estate and buying a second home, here are some questions you should ask yourself before you move forward.
How will I use it?
Before you settle into the idea of owning a property as a secondary home, think about how much you’ll actually use it. Will the amount you use warrant the cost of the purchase and ongoing monthly expenses? Do you have children or other family members who can also use the home if you’re unable to travel as frequently as you would like? Will they be able to cover the cost of utilities or other expenses when they’re there? Though you can’t foretell the future, you can get a pretty good idea of how much time you will be able to spend in your second home and if that time translates to the cost of owning a second house. Understanding your intentions is critical when considering purchasing a second home, whether you’re dreaming of a vacation destination or searching for an investment property.
Do I like it here?
If you intend to live in your second home, whether in vacation or part-time capacity, you’ll want to make sure you know and like the area before making a long-term investment in local real estate. Are you excited to spend your days in this community? Do you have a favorite local coffee shop, a go-to dinner destination, a park you love to explore — and if not, are you looking forward to finding some? Purchasing a second property should be a celebratory experience, and before you put down roots in a new city, ask yourself if you’re happy to spend your time there.
Do I plan to rent out my secondary home?
Many of those who invest in Atlanta for vacation houses choose to occasionally rent it out to help cover the mortgage cost (if applicable) and expenses. This can be a smart decision, but you must first look into the property laws in your state, city, and local neighborhood. If you buy a home that’s part of a homeowners’ association (HOA), they may have rules against renting out your property or rules that restrict how often you can rent it. In addition to learning if pertinent laws and HOA rules will allow you to rent the home, you also need to consider logistics. If you don’t live nearby, how will you prepare the house for renters? How will you ensure they take care of the property and pay you? How will you clean up after they leave? Preplanning for these issues before buying will help limit any unwanted surprises after closing.
What will the financial impact be?
Many prospective purchasers of secondary homes think that because they have the money in their accounts, they can spend it without incurring significant financial consequences. Moreover, they fail to assess the ongoing financial impact of owning a second home, including property taxes, insurance, utilities, maintenance, and repairs — not to mention the cost of traveling to the house, regular cleaning, and having to furnish two residences. Before you start the buying process, take the time to speak with your real estate agent and estimate the upfront cost of the home and the projected yearly investment. Then take these numbers to your financial advisor to determine how much secondary homeownership will affect your current financial situation and your future financial goals.
Do I have my primary residence paid off?
Numerous financial experts advise that only those who have paid off their primary mortgage should consider secondary homeownership. Others go over further and advise against buying a second home for those who are not already saving 15% of their income for retirement, have six months of living expenses saved for an emergency fund, have their credit card debt paid off, and have established a college fund for their children. Of course, some prospective buyers will determine that it’s worth it for them to buy a second property before they’ve met these criteria. If you decide to buy a second home and don’t have your first residence paid off, you’ll likely need a second mortgage. Mortgages on vacation homes are different from those on primary residences. They require higher credit scores and higher mortgage interest rates and that you have a certain amount of money in reserves.
How will this impact my tax situation?
Some buyers invest in Atlanta homes for sale to improve their tax situation. These individuals must understand the tax laws and how secondary homeownership will affect them. The IRS states that a vacation home can be classified as either a personal residence (if it is rented out fewer than 14 days per year) or rental property. If it is a rental property, you will have to report any earnings as income, but you can also claim losses. If this home is a personal residence, you can deduct the mortgage interest on your taxes. The smartest way to anticipate tax consequences is to talk with your CPA before you decide to buy.
Have you contemplated pursuing secondary homeownership with homes for sale in Brookwood Hills? Before you start looking at listings, talk with a professional real estate agent like Erin Yabroudy to see if owning multiple properties is the right choice for you.