Many people love the idea of owning a chalet in the mountains, a beach house retreat, or a cool apartment in the city, but never take the plunge. Having a second, recreational property is sexy, fun, and something most people look forward to or dream about. Buying a second home is a big financial and life changing step that requires a lot of thought. By following the steps below, you can make the decision of whether or not you are ready for a second property, and find out exactly how how to go about preparing for the purchase of a second home if it is the right decision for you.
Is a second home affordable for you and your financial situation?
Before you get excited about a cozy lake cottage, you should assess your financial situation and research the costs of a second home, beyond just acquiring a second mortgage. Be aware that some mortgage companies will charge more interest for a second home if you intend to rent out the property as a holiday short term rental or to a longer term tenant, as financial lenders categorize a rental as a greater risk than a property used as a primary residence.
Are the maintenance, insurance, and property taxes affordable when you are not using the property as a residence? Gas, electric, garbage disposal, and water utility bills all become regular monthly costs, even when you are not using the property.
As with the property you currently reside, unexpected upkeep and repair costs always appear at some stage. If you like the idea of a large garden for summer BBQs and family get-togethers, you must be prepared for the landscaping costs to maintain the property when you are away from your second home.
It is worth noting that hiring a property manager to keep check of your second home may be advisable, especially if you plan on leaving your property for longer than a few weeks at a time.
Pick a location for your second home
The idea of a second home on the beach may sound ideal, but will you have the time to visit your new second home as often as you would like to? Unless you plan on renting out your second home for large segments of the year, it may not be a good idea to invest in a property that you will only be able to use a couple of weeks a year. I know this from personal experience, I owned a 3 bedroom 2 bathroom condo on the beach in central america. Feel free to ask me all about it by contacting me here. I owned it for 4 years – used it three times myself, rented it irregularly at a loss and spent way too much time managing it and having it cleaned up after people used it as a party house on their vacation. Needless to say my dream of the perfect paradise getaway turned sour quite quickly and became a relief when I eventually gave up and sold it.
If you are already spending a considerable amount of time in a location, and have the finances to afford a second home, then purchasing a vacation home may be a different experience and a great option for you.
Look into insuring a second property
After you have evaluated the real cost of owning a second home, and you know the location you want to buy in, researching the cost and considerations of insuring a second property is next.
The insurer of your current property is a great place to start. By insuring both your properties and any vehicles may make you eligible for discounted rates.
Insurance rates can vary on lots of factors. If your new second home is in an area affected by flooding, or has a swimming pool, especially with no fencing or gates surrounding it, it may mean more expensive rates or no possibility of insurance coverage at all. If your second home is not in Alberta there may be different rules and insurance that apply.
Find your new second home and enjoy it
After you have looked into all the possible costs of owning a second home and you have selected potential areas you wish to buy, get in contact with a real estate agent and arrange some viewings to find your new dream vacation property.
A second home offers the possibility of enjoying glorious vacation time from the comfort and familiarity of your own home. After spending some time at your new property you will come to realize how cost-saving owning a vacation home is to renting, along with the privacy that cannot be found among the crowds of tourists at hotels and resorts.
A second home that is purchased in the right area can also be a financially beneficial purchase, even if you decide against renting out the property. Depending on how they are used, a second home can also be eligible for some tax benefits.
Choose a location that you love to frequent and use your second home as a place to unwind, relax, and experience memorable days with the family.
Thinking of buying a vacation home with friends? Read my post on How to Purchase a Vacation Home With Friends or Family