Many people consider real estate as the most profitable investment and purchase a second home. Read on to know more about the factors to consider for buying a second house.
Buying a second can be twice more special. Firstly, you are investing in a new home because your first investment was fruitful. Secondly, you are set to become a proud owner of two properties. However, even though you have gone through the home buying process before, you may need some assistance to make the right decision.
Are you sure that buying a good is financially a good decision? Will you get a good ROI (Return on Investment? Here are a few vital factors you must consider while buying a second home.
Consider the budget
Buying a home requires a significant investment. And, you must assess your finances and determine if you can afford to buy a second home. Like your first home, you may have to incur acquisition costs like home loan EMIs, maintenance, insurance, and other expenses. You should determine a fixed budget and then start looking for a home within it.
Also, having a fixed budget will help you know the exact amount you want to apply for a housing loan. While you may be tempted to buy a bigger house, you must resist such temptation and stay within your financial limits to avoid falling into a debt trap.
Consider the location
No matter if you are investing in a second home to settle down post-retirement, or wish to give the same to your old-aged parents or want to let it out on rent, you must be wary of the property’s location. If you are looking to generate a secondary income source from your second home, it should be in a place where there are necessary facilities nearby.
This will increase the demand for your home, and you may find tenants faster. Also, the location plays a huge role in the potential appreciation value of the property.
Compare the home loan offers
Generally, most people tend to apply for a home loan with the same lender as they got for their first home. It is always a good idea to do your research and compare the loan offers from different lenders. You may find a better offer from another lender, and it could potentially help you save a significant amount in the long-run. After all, there is no harm in comparing the offers before making a final borrowing decision.
Consider the tax benefits
If you are looking to rent out the second home, the income gained from rent is taxable, and you must report the same while filing your tax returns under the ‘income from other sources’ head. However, if you rent the house for less than 15 days in a year, the income earned is exempt from tax. So, be aware of the tax laws relating to your second home.
Rent it out
If you are not willing to occupy the home yourself anytime soon, you can rent it out and earn a handsome income. You can use the money to either invest in various money-market investment tools or use it to pay your EMIs or other expenses.
Being a homeowner, you must fulfil certain responsibilities. So, you should familiarise yourself with the Fair Housing Act and know about the various housing society rules before renting out. This will help you save yourself from unnecessary legal hassles.
Buying a second home is easier said than done. It requires careful planning. So, make sure that you do your due diligence before investing in a second home.