Second Homes Being Bought: You’d expect that the real estate industry would be cooling off with the current economic climate, right? Well… That’s not necessarily the case, according to 64% of real estate agents participating in HomeLight’s Real Estate Top Agent Insights for Summer 2022 survey. These agents report that buyers currently in the market aren’t buying their first home; they’re buying their second home first.
If you’re intrigued by buying your second home first and want to find a Realtor® to help, here are a few things you need to consider first.
1. Second Homes Being Bought- Will you be able to afford two sets of bills?
One of the bigger problems people face with buying a second property first is being able to afford two sets of bills. Although you’re getting rent, there’s no guarantee that the tenant will pay on time. Even if you’re doing temporary rentals, you don’t know if you’ll get enough bookings to cover the cost of owning the second property. You need to determine if you can afford the second set of bills just in case.
2. Do you have enough money for a down payment?
Long before you can determine if you can afford two sets of bills, you first need to determine whether or not you’ll have enough money for a down payment on that new property. There are certain rules you must follow if you want to get an FHA loan or a VA loan – if it’s possible at all. You can, however, tap into other avenues like pulling from your retirement fund, borrowing from loved ones, or taking out a personal loan.
3. How quickly can you get it ready to rent?
The rental market is extremely hot right now and there are not enough rentals to meet demand. That said, some properties can generate more income than others and you’ll want to do whatever you can to make sure you’re getting the max. You’ll need to consult a Realtor® for advice regarding how you can increase the value of your property, which would justify asking for high rent.
4. Who will manage the rental?
Owning a rental property and maintaining it can be overwhelming if this is your first time renting. So you need to decide whether you’re going to manage the property yourself or if you’re going to want to hire a property management company to do it for you.
If you go with a property management company, you won’t have to worry about familiarizing yourself with local and state landlord-tenant laws (which can be a hassle in and of itself), screen tenants, draw up leases, and collect rent, or address any maintenance issues. Oh, and of course, remembering to pay the utilities.
5. Can you keep meticulous financial records?
If you do go with the property management company, you’ll still need to keep extensive financial records for tax time. You’ll need to track rental income, maintenance invoices, utility bills, property taxes, and much more.
Today’s market isn’t the best time to buy because house prices are high and interest rates are still increasing. Yet, real estate agents estimate that when you buy your second home first, you could save up to $76,000! Not a bad reason to consider buying your second home first, is it?