Invest In a Second Home

HouseIt’s human nature to want what we don’t have. City dwellers long for quiet time in the countryside, landlocked residents dream of warm and sunny beach breaks, and those who live in moderate climates look forward to snowy ski breaks in the mountains. Investing in a second home can give you the kind of mobility you’ve always desired now and in your retirement—and can even help to boost your annual income if you choose to rent out your property. Follow these practical tips when looking for a second home to ensure your investment pays off:

1) Find your niche market.

If you’ll be renting out your second home to earn extra income, it’s important to consider the type of lessee who might be interested in your property. Families and retirees will likely want to be in close range to in-town amenities. Adventure tourists will likely want to be close to national parks or places where they can easily rent out equipment, while couples will want to escape to a destination that’s quiet and romantic. A good rule is to try to cater to travelers with similar interests as yours; that way, you’ll both be content when using your second home.

2) Lock into a good location.

Once you’ve determined your needs and those of prospective lessees, it’s time to brainstorm a list of potential locations. For each location on your list, do some research about the number of tourists it receives each year, as well as the average list price of its rental properties. Remember that a market already flooded with properties will be a tougher sell than one in a less developed area. In Canada, some of the best places to invest in property right now are Regina, Fredericton, Winnipeg, and Moncton; in the United States, strengthening markets include Santa Barbara and Napa in California, Tucson in Arizona, and Raleigh in North Carolina.

3) Set your budget.

Unlike first homes, a good portion of second-time home buyers pay in cash. If you can’t afford to do this, you may qualify for a home equity loan or a conventional loan. Be aware, however, that lending policies are often more stringent for second homes, especially those that will serve as rental properties. You may need to have a higher credit score, a larger down payment, and be willing to pay higher interest rates to qualify for a second loan. Check out the mortgage calculator Canada to help estimate what your mortgage payments will be.

4) Factor in additional expenses.

When you’re weighing the value of your investment, don’t forget to factor in additional expenses beyond your mortgage payments. All second homes require upkeep, though condominiums are generally less costly than houses. Home owner’s insurance is an absolute must for second homes, as it will protect against theft, liability, and fires. Talk to a local accountant to get a better understanding of how much property taxes will be before you make your final decision about buying a second home.