Whether you want to provide a gathering space for your family or simply generate an additional source of income through rent, a second home will provide you with the space you need. When you buy a second home, you have a permanent destination for long weekends, holidays, and eventual retirement. You can also diversify your income in case of an emergency, and you have something to pass on to the next generation.
But before you pull out your checkbook at the first house you spot, you should consider some important factors. The purchase of an additional home represents a significant investment of both time and money. Read through our five tips to explore different options and find the second home that’s just right for you.
1. Scope Out Natural Attractions
If your family loves the outdoors, a second home can give you constant access to your favorite outdoor attractions. When you shop for a second home, pay attention to the location and the natural surroundings. Properties located near national parks, campgrounds, or mountain ranges provide organic sources of entertainment, so you won’t have to pay extra to stay busy.
A location close to natural wonders also attracts potential renters, who may find it more comfortable to rent your house for a weekend than to camp on the park grounds.
You should also check out the yearly weather forecast for your desired city. If you live in a colder climate, a location that has moderate temperatures year-round will give you a welcome break from the snow and ice. Summer-only vacation homes severely limit your vacation time—and your earning potential.
2. Go the Distance
After you explore rental homes in your desired city, drive or walk the neighborhood. Find out the proximity to attractions like shopping centers, fine dining, spas, pools, fitness centers—whatever you would want to do on vacation.
The closer your house is to existing city attractions, the less time you’ll waste on the road when you spend the night. Easy access to malls and restaurants can also provide you with a selling point when you market your vacation home to prospective renters.
You should also consider the travel time from your existing home. If you envision that you’ll travel to your second home on a regular basis, think about the cost of gas or a plane ticket. If the hassle of getting to your destination discourages you from using your second home, you’ll wish you had invested in a closer model.
3. Ask About Rental Property Regulations
Find out the regulations about renting your second home to others early on in the process. If you want your second home to generate income when you’re not using it, you need to prepare accordingly. First, check to make sure your property doesn’t have any lease restrictions.
You also need to consult the tax regulations for rental properties. Most states allow you to rent your property for up to two weeks without having to pay additional taxes. But if you plan to stay at your second home only during one season of the year, it may be worth it to pay the additional taxes and generate more revenue from renters year-round.
Ask your real estate agent for more information about your home’s restrictions.
4. Create Meaningful Traditions
Do you envision spending every Christmas holed up in your cabin with your grandkids? Do you want to host a large Fourth of July barbecue each summer? If your second home will host large family gatherings or events, you need to think about the space you’ll need to accommodate everyone.
Even though a charming cottage on top of a mountain may look appealing to you, think of how hard it will be for your family to find parking. If you have large family or social events, you also will want to choose a second home that provides enough living space for everyone to fit comfortably.
You should also evaluate the number of bedrooms and bathrooms you need to provide. But the more space you have available, the more friends you can bring to your home—and the more space you can rent in the off-season.
5. Prepare for the Cost
Like any property, a second home represents a significant investment on your part. Before you talk to a realtor in your desired area, set a clear budget. You don’t want your retirement home to cause you undue financial stress now if you can’t afford it.
Properties require a down payment that measures one-third of the property value. So if you and your spouse have $40,000 in cash saved up, your price range for an investment property will sit somewhere between $100,000 and $140,000 total. Take precaution with your finances now, and you might earn back your investment over time.
A second home will provide you with a fun vacation option, a smaller living space for your future retirement, and a source of income for years to come. Remember these five steps when you begin the process of choosing a second home, or talk to an experienced real estate agent who works in your location of choice.