Things to Consider Before Buying Your Second Home

Northbrook Attorney, Real Estate

All types of property investments are heavy decisions, but buying your second home is quite special. You most likely want a home away from home, be it a vacation home or something away from the hustle and bustle of the city. It is a big deal, and before you take on the extra responsibility, there are things you should have in mind. This article will help you anticipate, plan ahead and place essential considerations in mind before taking that big step. Continue reading to learn more.

The Impact on Your Finances

Buying a second home at the wrong time is one of the worst things that can happen to you. It could be disastrous to your finances, so ensure that you can genuinely afford a second house before starting your search and purchasing a new home. Speak to your attorney and financial consultant about your financial situation realistically. Consider the more important things like your emergency funds, your mortgage payments on your current home, and such. If you can afford to, go for it. A second home may be useful for additional income if you use it as a vacation home to be leased in your absence.

Consider the Cost

Whether with a personal residence or rental property, buying a home is not a financial transaction without extra cost implications. Even if you intend to lease your home or resell for higher value, finding renters and buyers is not that easy. The rental process is also not so simple; in some places, leasing out your home is illegal if you are not a permanent resident. While you may have the basics figured out, ensure there are no loopholes that may cost you more than you have gained. You will most likely have to incur maintenance costs for a while. Insurance, cleaning, and standard bills will be your responsibility for a time, so ensure that you are financially ready for the burden.

Tax Implications

In some cases, buying a second home can be a great idea. Experts argue that purchasing a second house might offer you some tax benefits you might not be aware of. You may be liable to enjoy more tax and interest deductions if the value of your property increases your debt total to over a million. You may even be able to gain additional income if you intend to sublet or lease it out as a vacation home, as tax deductions are also available for rental-concerned expenses. Do note that you may not be able to claim the deduction on mortgage interests, but you can claim losses if your costs are higher than your rental income. You will need the perspective of a tax professional to get the best out of this.

The advantages of buying a second home are significant, but you should know that it is not necessarily the investment opportunity you need. Maintenance and closing costs can sometimes be too high to deem it a worthy financial investment. It is, however, a good idea that can save you money on renting if you are prepared for it.

If you need the counsel and opinion of a real estate attorney on your real estate investment, our attorneys at Hecht Schondorf can speak with you. Contact us here today.