Considerations to Make Before Buying a Second Property
BY: Brent Landrum
- If you rent the property for fewer than 15 days annually, you won’t pay taxes on rental income, BUT you can’t deduct rental expenses, such as cleaning, maintenance, etc.
- If you rent the property for more than 15 days annually, you would report the income and pay taxes, BUT you can deduct rental expenses.
- Find the right agent or broker. Speak with different real estate companies and agents to understand what they can offer, in terms of local expertise. Are they listening to your needs? Do they seem to know the market and nuances of purchasing a home in your desired area? Trust your gut when hiring someone to represent you.
- Evaluate the price per square foot. This may also help you decide between a single-family home or condo. Understanding what you will be getting for your money will help you avoid overspending.
- Look at the property history. Use the local county website to research your potential property's tax history and valuation. Taxes can make or break a house payment; appreciation is what makes real estate investment a good idea. Be sure the value of the property you're considering has grown over time. After all, you’re not getting into the second-home game to lose money!
- Price: Be realistic here, as you don’t want to be “house poor.” Run the numbers and put them into your budget to determine what will work for you. This property is to provide you with joy and/or income, NOT stress.
- Homeownership costs: Include utilities, insurance, maintenance, and HOA fees in your calculation.
- Financing: How will you pay for the property? Look into the pros and cons of both a mortgage and an equity loan. Begin by talking to your local mortgage lender, who can help guide you in the right direction. Knowing your options will benefit you in the long run!