The kids are gone, college tuition is a thing of the past and maybe your home mortgage is paid off. You and your spouse are at the peak of your earning power yet with fewer expenses. Admit it: you've finally hit that financial sweet spot you've long worked towards. But can I buy a house? How to buy a second home?
According to the National Association of Realtors® most recent Investment and Vacation Home Buyers Survey, the average second home buyer is in their late 40s, has a median household income of around $93,500. The median vacation-home price was $150,000. Like many, you may be considering downsizing your primary residence. This is the stage in life when many couples start looking for that cabin in the mountains or a beach getaway they've always dreamed about. This can be the time of your life.
While there is no one-size-fits-all approach or checklist that will answer all the questions of how to buy a second home, there are a number of factors any potential second home buyer should consider. importantly — the good habits that will serve you well for a lifetime.
Financial: How Much Home Can You Afford?
As a homeowner already, you probably have a solid grasp on the responsibilities and expenses involved in home ownership. Run Regions mortgage calculators to get a better idea of how much you can borrow and how much home you can afford.
Add to these calculations the ultimate purpose of the second home you are buying: is it for vacation or investment purposes? This will influence not only the tax implications of your property but also the costs and demands it places upon your time and bank account.
Geographic: Where Do You Want to Buy?
Start with the inverse: where do people want to be? Even if you don't plan to rent your home out, by sticking to the popular places where people like to play — think beach, lake, mountain — and you're more likely to find better resale values and improve the chances that your property will increase in value in the coming years.
According to the National Association of Realtors survey, 36 percent of vacation homes purchased in 2010 were in the South while 32 percent of investment properties were also in that region. Again, your decision will be shaped by the purpose of the second home. Most investment homes are typically located in urban/suburban areas while vacation homes tend to be in rural settings.
Time Management: Do You Want to Be a Landlord?
Many underestimate just how much time and effort can be involved in owning a rental property, whether you offer short or long-term rentals. This involves understanding leases, finding tenants, managing repairs or paying for a service to oversee these duties — which means involving another party that will earn a share of your precious rental income.
Finally, Research: What Helpful Tools Can Help You Make a Decision?
Some people already know exactly where they want to purchase a second home. Others prefer a more organic process of identifying important goals (near a body of water, convenient to a major airport, walkable community, etc.) and characteristics (bargain price, minimal maintenance, historic dwelling, etc.) they desire in a second home followed by research that helps them with the decision process.
There are numerous "Top 10/Best of" lists by publications like Money Magazine, Forbes and others enumerating their opinions about best places to live, retire, work, play and so on. Take them all with a grain of salt. And as just one more tool to help you to determine how to buy a second home.
- Save Time - Just be a good neighbor: when you make a trip to the grocery or hardware store, head to the library or just pick up a pizza for dinner, ask friends in the neighborhood if they need anything while you're out. Save them time or a trip today, and they'll likely do the same for you next time.
- Save Money - Entertain at home. Save money by having friends over to your house or apartment to share a meal, enjoy a wine tasting or create a dining club. Take turns hosting and cooking the main course while guests can provide appetizers, salads and dessert.
- Save for the Future - Pay yourself first. For instance, set aside a percentage of your income each pay period by setting up an automatic debit each month into a savings account.
- Save Time - App parties are springing up in museums, galleries and homes across the country. Invite your friends to come with their smart phones ready to share their favorite time-saving apps while picking up new ones — you could even use a new social app to organize it.
- Save Money - Take a cold hard look at your recurring monthly bills to realize savings: cell phone, home phone, cable, internet, electricity, memberships, insurance, subscriptions, etc. It's the items we are habituated to paying that we tend to gloss over when looking to save money.
- Save for the Future - Plan your purchases by the season for the most savings. For example, wait for Black Friday purchases in November for any big-ticket items. Post-Christmas January sales offer great discounts. Look for end-of-season sales like winter clothing in March, landscaping plants and trees in September/October, outdoor furniture and gear in August and so on.
This information is general in nature, is provided for educational purposes only, and should not be relied on or interpreted as accounting, financial planning, investment, legal or tax advice. Regions neither endorses nor guarantees this information, and encourages you to consult a professional for advice applicable to your specific situation.