FOX Business Network’s Deirdre Bolton will be taking her show “Risk and Reward” to San Francisco on Monday, September 29. Here are her Top 10 Tips on Buying a Second Home:
- Resist the impulse buy!
Don’t come back from vacation with the keys to a new house. All investments take research and planning. If you buy on a whim, you may end up with a second home you can’t afford or that doesn’t fit your needs.
- Be realistic about travel.
If you are considering a weekend getaway, staying within a two-hour drive ensures the most use.
- Short term versus long term.
How long do you plan to use the home? Do you see yourself holding it for a decade? If you’d like your second home to someday serve as a retirement spot, prepare for services you might need. Assess the home’s physical accessibility (steps, steep hills); also, check out local health care facilities (doctors offices or hospitals nearby, pharmacies that deliver) and consumer-related services (grocery shops that deliver) in the area.
- Visit all year round.
Get to know the spot from a non-tourist perspective. What are the locals like? Are they friendly to weekenders? Visit in all seasons. Are there local businesses who want to support part-time residents? Who can you call if you are worried your pipes are freezing?
- Decide how much time you want to care and maintain the second property.
A condo is lower maintenance than a home; your fees will be higher and you will you lose privacy, but the trade-off may be worth it if you don’t want to mow the lawn, look after a garden or a pool yourself. With a condo community, there may be certain communal guidelines to follow: You may not be permitted to hang beach towels on a clothing line, you may have to choose the color of your home from a prescribed palette. Only you know what will bug you and what won’t!
If you buy this second home, does that mean your travel budget is gone? Will you feel obligated to go to the house all the time? Are you OK with that if so? Know how much cash you can put down and still comfortably make payments. Payments include the mortgage, property tax, home/fire/flood insurance and a slush fund for home maintenance. If you lose your job, your pension gets cut, a family member needs financial help, could you still afford the home?
- Extra costs.
Insurance: Desirable areas are often at a higher risk for hurricanes, floods or forest fires; insurance may be pricey or in some cases (beachfront) not offered at all. In some cases, you may have to accept the possibility of losing your home, and all its value, to a storm. At a smaller level, some towns impose garbage collecting taxes or other special taxes. Know what they are! Maintenance, barring special circumstances, is usually about two percent of the home’s value per year for standard upkeep, repairs.
You don’t have to pay taxes on rental income if you rent your home for fewer than 15 days a year; but you can’t deduct any rental expenses. If you rent out your home for more than 15 days a year, you have to report the income. (Expenses such as maintenance and cleaning can be deducted).
- Renting your home out to strangers.
People may not care for your property as you would; if you do rent your place out, you may have more responsibilities as a “landlord” than you realize. The town/county where you buy will have landlord/tenant laws you need to be aware of. Google “The Fair Housing Act.”
- Town plans.
What public infrastructure plans have been announced? Research potential zoning changes. If a highway is planned to go through the middle of your town, or a mega-shopping center installed, that paperwork has to be made public. Some people like to buy property on golf courses or near public parks because the views are almost certain to stay the same.