Factors to consider before buying a second home

Factors to consider before buying a second home

While the economy is certainly not totally recovered, this might still be a good time for some Michigan residents to consider buying a second property. With low mortgage rates and plenty on the market to choose from, many people who can afford it are choosing to purchase a second home or vacation property.

While making such a purchase is certainly exciting, especially for those nearing retirement, it should also be taken just as seriously as the purchase of your primary home. Some buyers may be caught up in the excitement of an opportunity or a perceived bargain, but there are many other factors to consider when deciding to buy a new home.

• Is this really a good deal?

Some enthusiastic buyers may not take the time to assess the full costs of a given property if the sticker price is low. Experts suggest that buyers take some extra time to research the developers and previous owners to be sure that the property won’t turn into a money pit for repairs. For potential condo purchases it is also important to look at factors such as occupancy rates, association fees and services provided. Tax implications can also significantly impact the value of a second property.

• How will I use this home?

You will want different things out of a weekend getaway, a seasonal home, or a rental property. Financing options may also differ based on this choice, and banks will generally offer lower rates and smaller down payments for owner-occupied properties.

• Am I doing this for profit?

Experts say that short term profiting is not realistic in today’s market, so buyers of a second residential property should carefully consider how long they would like to own the home. If it’s only for one or two years, it is probably impractical to expect a profit upon selling.

As in any real estate transaction, Michigan buyers should consult with an experienced real estate attorney before entering into a deal.

Source: ABA Journal, “Home School: Some Tips Before Buying that Second Residence,” Susan A. Berson, May 1, 2012.