Is Buying a Second Home First a Good Idea? Ask These Questions
With interest rates increasing and housing prices still as high as they are, you’d assume that the market would be cooling off. According to 64% of real estate agents who took part in HomeLight’s Real Estate Top Agent Insights for Summer 2022 survey, they’re seeing people buying their second home, rather than their primary home.
If you’re interested in learning more about buying your second home before buying your first, you’ll want to find a Realtor® for guidance. But, before you do, ask yourself these questions first.
1. Can you afford to cover costs of two households?
A big issue people have during an economic downturn is trying to afford to pay for things. Right now, the cost of things continues to rise and money is being stretched thin. You need to be realistic when you’re looking at your finances. Ask yourself if you can afford a second mortgage payment on your own income if a tenant doesn’t pay. Ask yourself if you can afford to cover costs for two properties if you’re not able to book as many rental dates as you need.
2. Can you afford to save for a sizable down payment?
Before you can even think about crunching numbers on a second property, you need to think of a plan for saving enough money for that 20% down payment. With the rate at which inflation is gripping the nation, it might be harder than you think to save. Of course, you can draw from your retirement funds, ask for help from your loved ones, or take out a personal loan… However, that is another situation where you’ll need to be realistic about your options.
3. Will you be able to get it in renting-condition quickly?
There’s a huge demand for affordable rental properties right now, but there aren’t enough units to meet demand. Although you can get a decent rental income, you could get much more if you make improvements to your property that would justify a higher rent. You don’t want to set a high rent just because the rest of the market is high.
4. Can you handle managing the rental on your own?
Maintaining one household is hard enough, do you have it in you to manage your second property on top of that as well? If you worry about this, you might fair better if you hire a property management company for help. Sure, you will have to pay the property management company, but that might be well worth it. You wouldn’t need to worry about collecting rent, dealing with tenants, keeping up with maintenance, or learning landlord-tenant laws.
5. Can you keep detailed financial records?
Even if you aren’t going to manage the property yourself, you’ll need to take special care to track every penny that comes in and every penny that’s spent on your property. This includes tracking rent payments, security deposits, maintenance invoices, utility bills, property taxes, etc.
High-interest rates and high house properties, you might be hesitant to buy your second home first. However, real estate agents estimate that you could save $76,000 if you go this route. Since it’s such a huge decision, do plenty of research and talk to a few real estate agents for their advice regarding the local market before taking the leap!
