Buying a Second Home? Here Are 4 Things to Consider
Find out why this could be a good time to take the leap
If you’ve been toying with the idea of buying a second home, now could be a good time to do it. Interest rates are still low, and if you get to work quickly, your family could enjoy a new vacation home for the holidays. Whether you’re dreaming of paradise or profit, follow these four steps to a smart investment:
1) Scout the market
Start the search for a second home by finding a real estate agent to work with. Take note of the agent’s track record, because this can tip you off to superstar agents nearby and whether they’re a fit for your needs.
If you’re searching for a second home in Montecito, Hope Ranch or any of Santa Barbara’s upscale communities, I’m here to help. As a resident myself, I can help you evaluate the location and amenities of a property and provide information about comparable sales.
And, with more than 25 years in the industry and an eye for the long-term value of the property, I’ll also fill you in on historical prices and how comparable sales have fared, as well as resale prospects.
2) Gauge your return
Second-home buyers nowadays are more geared to enjoying their property rather than flipping it for a quick return on investment.
Still, you should consider that you will be away from the property much of the time and factor in additional maintenance costs, such as having a management company check for water leaks or frozen pipes.
3) Insurance considerations
Getting insurance for a second home may be more challenging than for a primary residence, depending on location. Typically, your second home is located farther away, and insurance companies might be concerned the home will not be properly maintained.
Having a separate policy specifically for your second home is usually a smart move. Your vacation home or second home will likely have some insurance hazards your main residence doesn’t. By creating a separate policy for this dwelling, you can tailor coverage options that make sense for your unique circumstances.
4) Learn the tax ins and outs
Savvy tax planning can make a difference in your return on a second home. Tax implications for second homes can vary significantly based on your financial situation and whether or not you plan to rent out the property.
Keep these in mind when figuring the impact on your taxes:
• Consider property taxes, utilities, homeowners association fees and other applicable expenses.
• Generally, the interest on the mortgage of your second home is tax deductible, and rental properties are subject to additional tax breaks. The deductions of a rental property come in an array of possibilities, including depreciation of the real estate itself and a separate, accelerated depreciation of personal property such as furnishings. Owners only have to use the property two weeks a year to get certain tax benefits on rentals.
If you’re interested in buying a second home in any of Santa Barbara’s upscale communities, I hope you’ll consider working with me. Check out my professional profile, then give me a call at 805.886.9378 or email me at [email protected].