Things to Know Before Buying a Second Home December 14, 2020

Things to Know Before Buying a Second Home 

In spite of a slow market, the demand for a second home remains robust. Whether it’s for a get-away or as an investment, you need to plan it out carefully – just like you did for your first home. Buying a home can give you a real high, whether it’s for your first house or a second one. 

However, there are a lot of things you need to consider before taking the plunge. Most people buy a second home for the purpose of rent income and possible resale – and for this purpose, the location of the second home becomes an important point. It’s better to buy a home which has a good scope for development and is in a safe zone for families to reside. Here are some factors to look at before buying your second home:

Can you afford another home?

Most people pay for a house with an initial down payment of around 20% followed by a home loan. Do keep in mind that the larger the initial down payment, the smaller the home loan needed and the lower the EMI amounts. If you are planning to use the house for renting, will it be enough to cover these expenses? As rent is also taxable, be sure that your expenses will work out over the years. Ensure that you don’t have other home or car loans still running before opting for another home loan – you might end up giving all your salary for EMIs! So, take a good hard look at your income plans too over the coming years before finalizing on a second house. 

Where is the house located? 

If you are planning a house for rent purposes, the location and size matters a lot. 2BHK and 3BHK are easily rentable, but smaller or bigger homes are slow on the rent market. It should be located in an area close to where there are schools and good job opportunities to get tenants easily. Invest in homes where there will be capital appreciation for resale purposes.

Did you consider the tax implications?

A second home means paying property taxes on two homes along with income tax on the second home even if it’s not used for renting!

Are you ready to be a landlord? 

There are certain responsibilities that come with being a landlord. Are you up to arranging legal rent agreements and lease deeds? Be sure that you are aware of them before considering renting out your second home. 

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