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Investing in real estate can be a good way to increase your wealth and buying a second home could be the start of something rewarding for you and your family.
If you are thinking about buying an investment property there are a few basics to learn that will stand you in good stead and set you on your way.
Here is a look at how to scout the market and find a suitable property, plus details of tax and insurance considerations, together with an overview of your finance options.
Take your time and do your research
It is always a good idea to show patience and do your research before committing to buy a second home.
If you get in touch with key contacts in your chosen location, such as home builders in Lee County, Florida, they can provide you with important information about local amenities, traffic patterns, and other useful data that can influence and affect the long-term growth in value of the property.
Never underestimate the importance of factors such as location and amenities, as buyers are often willing to pay a premium for a property that ticks all the right boxes in this respect.
Do your research and look at historical price data so that you can see how house prices have performed over time. This will give you a clear indication of the popularity of the area for buyers and show you how good your future prospects are for growth in the value of your intended second home purchase.
Tax and insurance considerations
If you are investing in a second home you do have to think about the tax implications and added insurance costs.
Property taxes vary between states so you need to get advice that is relevant to the location of your second home. It also makes a big difference to your tax burden depending on whether you intend to rent out the property or use it as a family home.
The number of days you spend in your second home can also determine how much income tax you have to pay. Find out your tax-planning options before you buy, so that you know exactly what your options are in advance.
Also, make sure you know what insurance is going to cost you on your second home.
Coastal properties are always popular as second homes but flood insurance in coastal communities can be expensive or even difficult to obtain in the first place.
Whether you are buying a coastal property or a condominium in a metropolitan area, check your insurance options before you complete the purchase.
Financing the purchase
Many people who decide to buy a second home tend to pay with a combination of some of their cash reserves and a loan for the balance.
You will often find that you need to put down a larger deposit if you are buying a property that is not going to be your main residence. Work out exactly how much you can afford comfortably and if you are buying a home to rent out, remember that you will have to find the cash to pay the mortgage when there are rental voids and no rent coming in to pay it.
Follow some of these simple but proven steps when buying a second home, and you will be increasing your chances of making the investment a success.
Faith Parkinson is a property investment consultant. She enjoys keeping up with market movements and has built up an impressive portfolio since 2009. She also enjoys sharing her research and ideas online.