Once you’ve reached a level of financial comfort, you may want to expand your real estate portfolio and venture into the market for a second home. Homes are an outstanding investment, especially in the current market where home prices are climbing and interest rates remain low. Whether you plan to use your second home as your vacation get-away or as a rented property for an extra source of income, here are some tips to help you choose your property successfully.
1. Use a local real estate agent
Rather than buying on a whim or relying on a quick visit to determine if an area is right for you, consult a local real estate agent. Nobody will know the nuances of your desired area better and their expertise will ensure your current and future needs are met. Using a local agent will help to ensure the home has all of the amenities you want and is located in an area with market stability, should you decide to sell later on.
2. Calculate your current home expenses and double them
It’s spreadsheet time. Add up all of your current home expenses for a month: mortgage payment, property taxes, insurance and utilities. Now double it. That number’s the amount you’ll spend on the home each month, if it’s comparable to your current property. If you add that total with your monthly living expenses – food, cable, internet, gasoline, and leisure activities, and you still have enough to comfortably get by month after month, then you are sitting pretty for a second home. Just be sure not to choose a second home that is more expensive than you can afford, after projecting your expenses. You should be able to relax and enjoy your second home without feeling financially burdened by it.
3. Spend some time in the neighborhood
One of the advantages of looking for a second home is time. Before committing, spend some time in the area you are looking to buy in. Most places seem exciting on vacation, but living in those areas year-round can be a completely different experience. Try to take multiple trips throughout the year to get an accurate feel for the local people and their lifestyles.
4. Research school districts and crime statistics
Neighborhood information that is easily available online will be a huge benefit, if you’re not familiar with the area. Look up crime statistics. Trulia has a user-friendly tool on its site that will lay a heat map of reported criminal activity directly over your desired neighborhood. Don't forget to look at school information. Keep in mind that schools with high ratings are typically surrounded by good neighborhoods.
5. Research common weather patterns for the area
If you’re looking to purchase your second home at your favorite vacation destination, keep in mind that the weather may not be ideal year round. Do your research to determine just how hot or cold your desired area gets. Also, look up average precipitation and storm statistics. If you find the numbers to be too extreme, you may want to look into purchasing a property in another, milder region. Keep in mind that extreme weather can affect many aspects of owning a second home from insurance costs to repairs to the ability to rent it out.
6. Price property management services
If your second home is far from where your primary residence is, you’ll need a property management company to keep an eye on renters (if you choose to rent it out), make repairs, and oversee the general well-being of the property. Factor that monthly fee into your second home calculations and also make sure you have enough to make the repairs they recommend. If property management costs are a concern, consider a purchasing a newer home that likely won’t need as much maintenance.
7. Don’t forget landscaping costs
The front and back yards of your second home are going to need the same attention as those at your first home or they’ll quickly make your home look like it’s in the middle of a jungle. Nobody wants to spend their first few days of vacation mowing grass and trimming bushes. Plus, some communities may have homeowners associations that will require a certain level of upkeep. If you want to keep landscaping costs minimal, you may want to choose a condo or a home without much property to maintain.
8. Consider tourism information in the area
If you think you may ever decide to rent the home as a source of extra income, consider whether it has draw as a vacation rental. Is the home near beaches, mountains, or other tourist attractions? If the home is in a sleepy retirement community or too far off the beaten path, it may go long periods of time without being rented. Just like in any business, location is everything.
9. Consider proximity to medical treatment
If you plan to use your second home for vacations or retirement, consider how close it is to a doctor or medical facility. If you’re planning to spend a considerable amount of time at your second home, you may want to select a primary doctor in the area. And if you have friends or relatives with children visiting, you’ll want to be extra sure medical treatment can be found nearby if needed.
10. Look for an up-and-coming area
A real estate agent can help you identify areas where cities have plans for improvements that will benefit the area economically. These areas usually show a rising trend in homes purchased by young professionals and young families. Up-and-coming areas may have very low priced homes that will be absolute steals as the area becomes sought after.
Your second home should be a reward for your hard work. A place to relax and truly enjoy life. Or, a rental property that provides you with extra income so you can rest easy in retirement. These tips will help make sure your second home isn’t your first worry each day.
Interested in learning more about purchasing your second home? Contact one of our Maryland realtors and begin your house hunt!