Here are five things you need to know before taking the leap.
1. Prices are at all-time lows
In many second-home hot spots, prices are still close to their five-year lows. When the real-estate bubble burst, some of the hardest-hit markets were vacation destinations. Many vacation home areas experienced overgrowth and may now be suffering from foreclosures.
2. Think ROI
Consider the possible return on your investment. Whether or not you decide to rent the home out, you will want to consider buying a place that has good rent potential. That’s because a home’s rent ability can affect its resale value. Before you bid on a house, make sure the homeowners association or township allows short-term rentals.
3. Don’t count on rental income
If you are planning on counting on rental income to cover the costs beware. According to HomeAway.com, a typical second home property rents out just 17 weeks a year. Make sure to account for the weeks the home won’t rent. Plus, you’ll need to pay for cleaning, maintenance, insurance, and maybe management fees. Make sure to plan on the maintenance costs of the property being at least 15% of the income.
4. Your mortgage rate depends on how you use the home
How you use the home depends on the mortgage rate you will receive. If you plan to use the property primarily as a second home and you’ll pay about the same mortgage rate as you would on a primary residence. If your plans are to use the home for rental income and need that income to qualify for the loan, you’ll need to have as much as 25% for the down payment and pay up to one percentage point more in interest.
5. Take advantage of tax benefits
Talk to your tax guy before you buy. If you rent the home out for two weeks or less you won’t have to report a cent of income to the IRS. The good news here, you can still deduct property taxes and mortgage interest. On the flipside, if you stay there for less than two weeks or 10% of rental days, you can deduct operating costs in addition to interest and property tax.
But where should you buy? According to CNBC here are the top places to buy a second home. If you are thinking about buying a second home I can help you find a professional agent in that area.
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Needham MA Real EstateNeedham, MA - $295,000
11 2Nd Ave - Commercial - Year Built:2011 - Acres:12 hours agoNeedham, MA - $639,000
97 Great Plain Ave - Single-Family - Colonial - Rooms:8 - Beds:4 - Baths:2Needham, MA - $1,399,000
207 MARKED TREE RD - Single-Family - Colonial - Rooms:11 - Beds:5 - Baths:4/1Needham, MA - $629,500
24 Gary Road - Single-Family - Raised Ranch - Rooms:7 - Beds:3 - Baths:2Needham, MA - $575,000
25 Highland Court - Condo - - Rooms:5 - Beds:2 - Baths:2
Wellesley MA Real EstateWellesley, MA - $925,000
6 Crestwood Dr. - Single-Family - Colonial - Rooms:8 - Beds:4 - Baths:2/13 hours agoWellesley, MA - $1,420,000
31 Longfellow Rd - Single-Family - Colonial, Contemporary - Rooms:11 - Beds:5 - Baths:4/1Wellesley, MA - $579,000
2 Cleveland Road - Single-Family - Cape - Rooms:8 - Beds:4 - Baths:2Wellesley, MA - $775,000
6 Paine St. - Single-Family - Colonial - Rooms:7 - Beds:3 - Baths:1/1Wellesley, MA - $550,000
8 Mansfield Road - Single-Family - Ranch - Rooms:7 - Beds:3 - Baths:1/1
Dedham MA Real EstateDedham, MA - $699,000
21 Church St - Single-Family - Antique - Rooms:9 - Beds:4 - Baths:2/12 hours agoDedham, MA - $135,000
30 Eastbrook Rd - Commercial - Year Built:1985 - Acres:02 hours agoDedham, MA - $274,000
11 Massachusetts Ave - Single-Family - Bungalow - Rooms:6 - Beds:2 - Baths:23 hours agoDedham, MA - $348,999
36 Blueberry Hill - Single-Family - Ranch, Other - Rooms:6 - Beds:3 - Baths:14 hours agoDedham, MA - $379,900
86 Robinwood Rd - Single-Family - Cape - Rooms:7 - Beds:3 - Baths:24 hours ago
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