Second Home Buying Guide: 5 Steps to Buying Your Dream Vacation Home

Now that the real estate market has somewhat recovered, more and more homeowners are once again looking into fulfilling their dreams of owning a vacation home or buying a second home for retirement purposes. But, buying a second home comes with certain challenges that homeowners might not be aware of because they didn't have to worry about them when they bought their first home.

This five-step guide from Trusst Builder Group's Wilmington NC builders will give you a better idea of what goes into buying a second home.

Step 1: Ask Yourself – Is Now the Right Time to Buy a Second Home?

Making the decision to buy a second home requires more thought and consideration than it does when buying your first home. Even though you might have the money to afford it, deciding to buy a second home demands you to think before you leap.

For example, you need to know exactly why you're buying the home. Will it be used for vacation, retirement, or for investment purposes? You need to know the answer to this because your answer will directly impact the type of home and location you should be looking at.

In addition, while you might think you can afford another property, you need to be absolutely sure before you take on the added expense. Take a close look at your finances and ask yourself if your life is going to be undergoing any planned changes in the near future. Life events like a job change or becoming unemployed, having a baby, taking care of an elderly parent, etc., can have a huge impact on your future finances.

Step 2: Scout for the Right Home in the Right Area

Again, the type of home you choose and the area it is located in will be largely impacted by your reason for buying the second home so it is important to do your homework and scout for the right home in the right area. For instance, if you want a vacation home, then you'll want to look for a home in a vacation-like location. If you want a home for retirement, then you should be looking for a home to meet your future needs in a reliable community. Or, if you want to buy an investment property, then you should be looking for a fixer-upper in a neighborhood that has experienced a fair degree of home appreciation.

To help ensure you find the right home for your needs, you can talk to the locals and visit the area at all times of the day and night during the week and on weekdays to get a better sense of the community. If you're buying a vacation home, then you might want to rent a home in the area for a week so you can experience the area in person.

Step 3: Learn About Second Home Financing and Negotiations

Lenders have stricter qualifications for second home mortgages simply because they're taking on a higher degree of risk. So, a buyer can expect to have to put much more down on a second home than they did their first home. In cases where the buyer is going to be renting the property out and they're using that expected income to help them qualify for the loan, the lender will usually require at least 25% down.

One way that buying a second home can be financially beneficial is if the home that's being sold is the seller's second home. In such cases, the seller will usually be more flexible with the negotiations because they're usually financially driven to unload the property. In some cases, a buyer will even be able to request certain special terms such as having the seller add funds to the buyer's down payment.

Step 4: Know the Tax Implications of Owning Two Homes

Real estate taxes are complex enough as they are and they become even more complex when another property is added to the mix. Therefore, it's important to have some understanding about how buying a scone home is going to affect your taxes.

For starters, you have to consider the property taxes, utilities, HOA fees, and any other applicable expenses for the property you're buying. As far as the interest on a second home mortgage goes, it is tax deductible, and additional tax breaks are available if the property is going to be rented out. But, if the home is rented out for 15 days or more out of the year, then the homeowner will have to report all rental receipts to the IRS as income. For these and other reasons, a homeowner should consult with a real estate tax professional before choosing to buy a second home.

Step 5: Be Wary of Alternative Ownership Options

All too often, homeowners who enter into time shares or other fractional ownership agreements will eventually find themselves burdened by owning a property that doesn't hold up well financially over time. And, when it comes to securing a second mortgage, a single-family home with one buyer is much easier to finance than a condo or townhome that's being purchased by more than one person.

To make sure your second home buying experience is as positive as possible, choose a reputable agent and do your research and due diligence.

Trusst's Wilmington NC Builders Can Build Your Second "Dream" Home

The best way to ensure your second home is exactly the home you want is to have it custom designed and built just for you. In most cases, this option is more convenient and equally as affordable as buying an existing home. And, when it's your dream home we're talking about, you want it to be right.

Call Trusst Builder Group today at 910-371-0304 to schedule a consultation with one of our architects. We'll design and build your second home so the home you get is the one you've always wanted.