Mortgage rates hold close to all-time lows (although the pros expect them to increase) – and it’s happening at the same time that many of us are no longer beholden to a desk five days a week. These and other trends explain why, as Bloomberg recently noted, buying a second or even a third home is more popular than ever. But while buying a second home can be an exciting and rewarding step, it also requires a decent amount of work. Here are six questions to ask yourself before buying a second home.
1. Does the location meet your needs?
Austin Allison, co-founder of condominium company Pacaso, says it’s important to ask yourself how far away you want to be from your primary residence. “Are you ready to fly or do you prefer to drive?” A survey conducted by the company found that 70.9% of people would prefer a second home they can drive to rather than fly, âsays Allison. If the second home is far from your primary residence, hiring a property manager can be beneficial in keeping an eye on the property. If something goes wrong or needs maintenance, a property manager can organize and supervise the work, so you don’t have to go back and forth. But property managers don’t come cheap – data from Trulia shows they can cost as much as 20% to 30% of your rental income.
2. How are you going to use the house?
“What is the destination of the second home? Use only on weekends and summer? Since the pandemic, many criteria have changed or changed, âsays Cee Scott Brown of Compass’ CeeJack team in the Hamptons. âBased on current and future use, is the house large enough with the right layout and number of rooms to adequately meet the needs of homeowners? Most city dwellers looking for country homes want / need more square footage in their second home than in their city apartments, âsays Brown. If you plan on working outside the home or having frequent guests, also think about how this might work. And also think about how often you will be using the house. âHow much time can you really spend in your second home? Will you be using it only a few times a year or do you plan to use it throughout the year, âsays Allison.
3. Can you really afford the house
“What are your income and your comfort level to spend?” Other financial factors include the cost of furnishings, taxes, insurance, utilities, and general maintenance. The overall cost of full homeownership can take a toll on what is supposed to be a relaxing and enjoyable experience, âsays Allison. The general rule of thumb is that homeowners should budget 1% of the home’s purchase price for annual maintenance, unless the home is older and likely to have more problems, in which case it’s wise to schedule a higher budget. In addition, all of your debts, including your mortgage on your primary and secondary residence, should not exceed more than 36% of your gross monthly income.
4. What’s your appetite for the interview?
Homes are work, sometimes a lot of work, and this is something future second home owners need to understand. You may need to find a handyman, landscaper, or others who can help you maintain the property while you are away. “Or you might want to hire a property manager to get things neat and tidy,” explains Keith Markovitz of Compass Palm Springs, Calif., A popular second home destination, who notes that “it can make all the difference to enjoying a second home instead of working on things around the house.”
5. What does the future look like?
If your family is still growing, or you have kids getting ready to go to college, the type of home that welcomes you now may not be the best choice in the long run. âHow many people are you trying to accommodate? Try to think about what your family will be like [in the future] compared to what it looks like right now. Will you have other children? How often will the extended family be home with you? Allison said.