Whether you’re planning to flip a home or just want a vacation house, buying a second home is a big commitment. A second home can be an excellent place to relax or a great way to make a profit as long as you’re prepared for all the challenges. Before you start looking for a second home, there are a few important things you need to think about.
Choose the Location Carefully
Location is always important when buying a house, but many people make the mistake of thinking they know an area just because it’s their vacation spot. The reality is that tourists often miss out on getting to know specific neighborhoods or seeing how a town functions during the off-season. For example, if you’re looking at lofts in downtown San Diego, you’ll want to know about seasonal festivals and events such as San Diego Comic-Con, which can have a huge impact on traffic patterns. Take the time to do your research and really get to know the area.
Know That Banks Increase Interest Rates for Second Mortgages
When deciding whether or not you can afford to buy a second house, keep in mind that your interest rate will be heavily affected by your credit history. Lenders tend to raise interest by about half a point on second mortgages because they’re a little more concerned about the buyer’s ability to pay the mortgage. Rules tend to be a little stricter, so be prepared to prove your financial stability and pay a little extra when buying a second home.
Educate Yourself About Taxes
You can expect your taxes to get a little more complicated with a second home. If you rent it out for more than 14 days a year, you can deduct rental expenses, but you’ll need to pay taxes on the income. Those who flip houses and sell them may also need to pay capital gains taxes. Consult a knowledgeable tax expert who can help you estimate taxation costs and work that into your budget.
Think Carefully Before Trying to Flip a House
All the DIY real estate reality television shows make house flipping look like a fun experience that involves just slapping on new paint and making a huge profit. The reality tends to be a little more complicated. Make sure you have the skills, knowledge, budget, and time to handle renovations and reselling a property before you buy a fixer-upper. It can be a great way to make money, but it’s not ideal for the inexperienced.
Budget for Additional Maintenance Costs
If you already have one home, you probably already know you need to think about things like condo fees, insurance, and maintenance costs. Keep in mind that a second home may require a little more money for maintenance if you’re leaving it empty or renting it out for most of the year. You have to deal with things like cleaning it between tenants, paying for property management, and getting liability insurance.
Buying a second home can give you a wonderful place to relax or generate a nice bit of rental income, but make sure to do your homework before you take the plunge. If you’re looking at real estate in downtown San Diego, your first step should definitely be to enlist the help of a real estate agent who knows the area well. The experienced agents at 92101 Urban Living can give you the scoop on everything about San Diego’s downtown area. Call one of our friendly agents today at 619-649-0368.