If you’re considering purchasing a second home, you probably have one of a few motivations.
Maybe you’re looking to finally buy your dream vacation home, a home-away-from-home in a location you’ve always treasured. In other cases, you might be interested in diversifying your income and your investments to include real estate in an area you love.
But regardless of whether your second home is more for business or pleasure, there are certain factors that will make your investment in that property worthwhile.
In order to avoid resenting the investment or wishing you’d spent the money elsewhere, there are three primary factors that you need to assess before you buy a second home.
Good Potential Resale Value
Even if you’re not purchasing the home strictly as a financial investment for the future, owning another home is a much more positive experience when you don’t lose money on it in the long run — and that’s only likely if your home appreciates in value over time.
Of course, it’s impossible to predict the future value of any real estate investment with certainty. Home values can fluctuate with unpredictable factors such as the neighborhood’s value and general real estate market trends in demand and supply.
However, certain factors may increase the odds of better real estate value over time. These factors include:
- Permanent attractions nearby – Natural attractions such as a beach or a waterfront, a mountain range, or a national park can lend long-term value to property. Other permanent attractions that can mean higher property values include local entertainment venues, popular city parks, and great views or overlooks.
- An attractive neighborhood – Different homebuyers will have different priorities for a neighborhood. For example, retirees won’t care about local schools, and young families might not care as much about nightlife options. But choosing a neighborhood that has sustainable perks like walkability, historic architecture, and a distinct culture can all be good for long-term value.
- Access and infrastructure – In addition to the immediate neighborhood, a home is more attractive if it’s located in a municipality that makes it easy to get around and access the resources you need. This includes easy access to an airport, top-of-the-line health care, and opportunities for higher education.
The Ability to Rent the Property Easily
Even if you hadn’t originally planned on becoming a landlord, choosing a second home that has rental potential is a smart move.
It’s nice to have the option to rent out your second home if, for example, you don’t spend as much time there as you had planned — or if you end up needing the extra cash. And, of course, web-based services like AirBnB have made renting out your property much easier than it used to be.
In most cases, the things that make a home desirable to rent are the same things that make it a nice place to own, which we discussed in the previous section.
However, you can significantly improve a home’s rentability if your second home is located in a tourist-friendly city. If people come through your town regularly to visit friends, check out concerts, attend business conferences, enjoy local attractions, there will be a higher demand for rentals. It also helps if the tourism is relatively stable throughout the year (instead of fluctuating seasonally). You can assess the demand by using a tool like AirDNA.
You should learn about the local laws that govern short-term rentals locally so you can understand what kind of fees and taxes you’ll eventually be responsible for.
Renting the property will also require additional expenses. In addition to taxes and legal fees on a rental property, you’ll have to pay for things like these:
- Regular cleaning and maintenance
- Advertising fees and booking software fees
- Additional insurance costs
Maximum Potential for Personal Enjoyment
The purchase of a second home is about much more than the cash value you can eventually get back from the investment. It’s about the enjoyment you get out of the property each year. For most owners of second homes, the property will come to represent a place of respite and relaxation. It will be a destination for vacations, holidays, and special trips, and will be the source of many happy memories.
So, before you make a purchase, consider any factors that might detract from that enjoyment.
For example, if the trip required to get to your second home is long, tedious, or relatively expensive, you might find yourself hesitating to use it as often. This is why many owners of second homes value locations with reliable transportation infrastructure, such as proximity to airports with plenty of direct flights.
Also, consider the mental energy you’ll have to spend on a second home when you’re not there. If you have to fret each hurricane season about whether or not the property will be damaged by storms or the ensuing power outages, for example, it can seriously detract from the personal enjoyment you get from the property.If you have to fret each season about potential hurricane damage to your second home, that can seriously detract from its value. Click To Tweet
Minimal Ongoing Costs
One of the most basic things you need to know to understand the true value of your investment is exactly how much you’ll have to pay to maintain it each month.
Just like any other property, second homes have regular recurring expenses, such as those for utilities, repairs, landscaping, association fees, and security systems or internet access.
Owning a second home can also affect your taxes in various ways depending on how often you rent out the property and live in it personally. Here’s a helpful column with more details about things like deductions for mortgage interest and annual financial losses once you decide to rent your home out. Of course, an accountant can weigh in on these kinds of details in more depth once you narrow down your property choices.
The point is that these expenses can and should influence how much value you can get out of a second home at any price point.
We will all have different tolerances and expectations when it comes to how much effort and cash we want to put into a long-distance property investment. The key is clarifying those expectations upfront before you’re locked into a long-term commitment.
A Unique Opportunity for a Second Home
Are you still deciding on an ideal location for your second home?
Don’t miss your chance to check out a unique real estate opportunity in beautiful, historic Savannah, Georgia.
Savannah is attractive for potential landlords because it’s a tourist hotspot. Vacationers flocking South to avoid harsh winters, parents and grandparents visiting students at the Savannah College of Art and Design, and travelers exploring the city’s entertainment, parks, dining, history, and culture are all among those who seek short-term rental space in Savannah.
Savannah is also ideal as a vacation home because residents can enjoy world-class beaches including those on Tybee Island, Hilton Head Island, and St. Simon’s Island within a short drive. That means second home owners can get beach access without worrying about hurricanes, salt damage, high insurance premiums, and unreliable seasonal demand.
The homes of Upper East River are luxury, single-family homes in a new riverfront development called Eastern Wharf. Homeowners can choose from among a variety of home plans, from luxury lofts to historic rowhouses, all of which were expertly designed to blend with Savannah’s historic architecture and character.