Benefits of Owning a Second Home
Whether it's a vacation home or a rental property, a second home can give you many of the same personal and financial benefits as your first home. Make sure you understand the tax implications before you buy, however, so you can make the most of your home investment.
If your second home will serve as a personal getaway, you're probably looking forward to having a place to relax with family and friends. Whether it's a lake-side cottage or a condo by the beach, knowing that you can retreat from the hustle of daily life to your own private vacation spot has an obvious appeal.
Investing in a second home has the potential to pay off in a number of ways. First, there are the same financial rewards that come with homeownership in general: tax-deductible interest* and possible price appreciation. In addition, you may be able to use the home as a source of rental income. If it's a vacation home, renting it out for part of the year can help offset the costs of ownership. If it's strictly a rental property, you can use it as a significant source of income, although the tax implications may be somewhat different.
Can you shop for, look at, and ultimately make an offer on a home without real estate experts? Technically yes, but why would you when it costs you nothing for agents like us to take much of the stress off your shoulders? Not only will we help identify properties you might be interested in, arrange showings, and ultimately handle the offer process, but we also have knowledge of the market that you don’t possess. Finding the perfect home can be a daunting task, this is where our expertise and wealth of knowledge come into play. Let us show you around some homes that meet your dream home criteria so you can find the one that's right for you.
Although you can't deduct mortgage interest for an investment property, you can deduct operating expenses (such as maintenance and advertising costs) that exceed the rent you collect, as well as losses on the sale of the home. Neither is deductible for a second home.
*Consult your tax advisor
Buying a second home is more complicated that buying a primary residence. There are different underwriting & down-payment requirements. Many lenders will have different programs and rates will vary depending on whether or not you will rent the property. Working with a financing professional is key to starting this process.
Not only do you need to buy the home, but you often need to completely furnish it and purchase duplicates of many items that you have in your primary home. You need to build these costs into your overall budget, including repairs, maintenance, utilities, and other costs like property management if needed.
Consider how often you want to visit, how far are you willing to travel, how much are you willing to spend for transportation and how all of the factors impact you and your family. If you are planning to rent, consider how much you plan to use the house and when, you may find that you want to use it during the same dates that people may want to rent it. Is personal enjoyment more important that rental revenue?
Since you will need many of the items you have at have at your primary residence, the best approach is to standardize on the same brands, models and supplies that you already use. For example, having the same coffee maker s, TVs, DVD players at both homes makes day to day living less complex. It's also best to setup your main rooms with similar supplies and locate them in similar areas so both homes feel very similar for basic living needs.
OK, now your thinking we have lost our minds after we just told you to standardize your homes. You only want the products and appliances to be standardized. Make the second home different from your primary home in decor, colors, furniture style and overall look. This will make you feel like you are on vacation even if you frequently use the home. A different feel (with standardized basics) makes your second home easy to live in and manage, but gives you a great sense of change ... more of a get-a-way!
1 N Whittaker Street Suite A New Buffalo MI 49117
1 N Whittaker Street Suite A New Buffalo MI 49117