Buying a Second Home is Easier Than You Thought
Buying a home is usually a roller coaster of emotions for many. Buying a second home takes home ownership to a new level. It is also an achievement by any standards. Buying a second home is just as exciting but it is usually a reserve of the few who are relatively rich and can afford such a lifestyle. That doesn’t have to be the case. Many people find it a challenge to move beyond the purchase of their personal home. Truth its, although there are some additional challenges, it still is achievable for most. Many existing homeowners, especially those who have been in their current home for many years and have equity, can take out a HELOC on their property to purchase the second one.
Advantages of Owning a Second Home.
A Home Away from Home
A second home will allow you to have a home away from home where you can go to during vacations. It can act as a gathering place for you and your family to celebrate family traditions such as Thanksgiving and Christmas. Many people choose to purchase their second home in a popular travel destination so they can list it on AirBnB or otherwise easily rent it out for popular times of year. This can substantially reduce your overall cost of the property while still paying down the principle and earning equity.
Even if you don’t choose to turn your second home into a money maker, if you bought the property right and the real estate market stays strong, you will build additional wealth. Over time, your home can appreciate in value particularly if you buy a house in an area that is likely to remain popular. One thing that many potential, second home buyers overlook is the ability to choose the city its in. Don’t be limited to your home town. Part of having a second home is that its a destination for you and your family. Buying a second home in an area chosen because of its strong financial outlook for the local real estate market is how billionaire real estate investors choose where to buy…why not you?
By no means are we acting as a tax professional, but for many, a second home can provide an added tax benefit by providing new deductions. When you buy a second home, you can get to enjoy five major tax benefits.
- Mortgage interest
- Property taxes
- Home improvements
- Costs associated with renting out the house
- Tax free vacations
In many instances,for the mortgage interest, you can write off up to 100% of the interest you are paying for a maximum of $1 million of the loan. You can also deduct the interest on your line of credit or home equity loan if your home requires some improvement. You can also deduct the property taxes of your second home which are calculated based on the value of the home. When it comes to renting the house, your rental income will not be charged any taxes if you rent the home for not more than 14 days. When it is time to sell, knowing which your residence home is and which is a second home will help you get great tax deductions.
Choose a Vacation Spot for Your Second Home
A second home enables you to live a good lifestyle. As mentioned in the beginning of the article, many feel that owning a second home is only for the wealthy; partly because it is a luxurious lifestyle to vacation to your own condo on the beach. This is because you will get to live in an area you really like and not just for its closeness to your workplace. You will want to choose from the hottest real estate developments to insure that your property value increases. Most vacation homes should be located in attractive places that people enjoy visiting such as golf courses, beachfront resorts, seashores and mountains. If these are the things that attracted you to the place, you will enjoy visiting these places from time to time when living in your own home.
Some people buy a second home in areas where they intend to live during their sunset years. By buying the home early, it will give you an opportunity to familiarize yourself with the surrounding and the neighbors as well as get some payments in for a new refinance to a 30 year mortgage when you actually retire. Keep in mind you would have been paying down the principle of the second home and hopefully offsetting your mortgage payment with short term renting. The reduction in the principle coupled with the increase in value coupled with starting the 30 years over again, you can substantially reduce your payment for retirement.
You can take part in community activities and gain a sense of belonging in the society long before you retire. Over time, you will decide whether you really want to retire in that area or whether you will look for a different place to settle after your retirement.