Buying a second property is an exciting venture, and for existing homeowners, there are different opportunities available to help make that dream become a reality. Secondary properties are purchased for many reasons, and in many cases can be a practical purchase that meets a variety of different needs. Whether you are looking to own two properties, you want to invest in real estate, or you are in search of a property or home for recreational purposes, the first step is to always do your homework.
In terms of financing this dream, be sure to come in prepared with a strong debt to income ratio and in a good financial position to make this commitment. Because of the home equity secured in your primary residence, you may qualify for a second mortgage, or have the option to refinance your existing one.
Before you speak to your financial advisor, lender, or broker, be sure to come up with a plan in place. Here are some great options for secondary properties and what they may look like for you.
Vacation Home or Cottage
A vacation home or cottage is a dream for most people. Who wouldn’t want to have their very own lake house or ski chalet available as a personal seasonal retreat? As a bonus, a vacation home can also be a good investment as it has the capability to generate income or serve as family enjoyment over generations. However, every luxury comes at a cost. There are many considerations to be made when it comes to buying this type of secondary property. Vacation homes may require a larger down payment and specific insurance that may have its own specifications and provisions to abide by. Here are some points to address before buying this type of secondary property:
- What area and home will meet my lifestyle needs?
- Is this affordable, who is financially responsible for costs?
- Who will maintain the premises?
Investment Property
If you are looking at purchasing an investment property secondary to your home, you could be setting yourself up for a sizeable profit. Investment properties are a great first step towards finding financial freedom through real estate. There are a few different ways to manage an investment property purchase. Some choose to buy a home for less and flip it to sell for a higher return on investment. Others may be looking for a single or multi-unit home to rent out and generate monthly income. Both of these options can be successful and offer you the choice to be as involved or uninvolved as you want, as there are property management companies that you can hire to handle tenancy, maintenance, and repairs.
Recreational Property
Buying recreational land can be a great investment with endless opportunities. Whether you purchase the land for personal use, plan to build a family cottage, or are looking for land to start your own business, the purchase has the ability to be a worthwhile investment. The land itself is a valuable asset and it comes with an abundance of benefits:
- Inexpensive long-term investment
- Recreational land can provide tax deductions
- Can be a “hands-off” investment
Before purchasing, you should take into consideration what owning a secondary property will mean for you, and what income you will require to finance this dream successfully. This means determining the type of property you are in search of, the geographical area, and your end goal while also looking into costs such as maintenance, property taxes, mortgage payments, upgrades, and utilities.
Investing in your future with real estate can be a great and fruitful adventure when you have the right people in your corner. For help with buying or selling your secondary property, reach out to our TEAM today.