Buying a second home can be challenging. It requires a smart decision whether you're buying your second home as a rental property, a secondary residence, or a vacation home. It is one of the biggest financial decisions many people make. The question, what is your main reason for buying? Is it worth buying a second home during the COVID-19 pandemic?
As per bloomberg.com, a pandemic is a terrible time to buy real estate. Home prices are high and so is uncertainty. But, if you are financially ready and you are able to find a cheaper home, why not take that opportunity and buy additional property. I have listed below some of the benefits of buying a second home:
Use as a Vacation Home
One of the reasons why a lot of people are buying a second house is because they want to use it as a vacation home. Every time you travel to a beautiful destination and stay in cozy and relaxing accommodation, you play with the idea of buying a second home with that kind of atmosphere. A place where you can chill and relax after the long and stressful work week. Aside from relaxation, one of the benefits of having a property in your favorite vacation destination, you don't need to pay for an expensive hotel room or to rent a home. You can stay whenever you want and indulge in a worry-free stay on your own property. If you also decide to permanently leave the workforce behind, it's nice to have a vacation home where you can spend the rest of your life.
Rental Property Income
The reality of a second home for most people is that they want it to be an investment. Is buying a house a truly good investment? Well, it depends. Some homeowners or investors rent out their homes to generate passive income. This income could be used to cover the insurance, mortgage, taxes, and other expenses on the property. You have several options on how you want to rent out your home. One is to lease the home on a monthly basis to a tenant using a long-term contract. Another option you might consider for short-term rental services such as Airbnb, renting out your home weekly or even daily. These options will gain some extra income from your second home.
Tax Benefits
Buying a second home is eligible for a mortgage interest tax deduction. The principal loan amount and the interest that you paid towards the loan also lead to a tax deduction. Please be advised that you may qualify for tax benefits depending on your circumstances. You can get tax savings for mortgage interest and property taxes if you don’t primarily use your second home as a rental property.
Location for Gatherings
If you want to spend great memories with your family, friends, and work colleagues, you can use your second home as a venue for different gatherings and events. It's more convenient than booking out hotel rooms or renting out homes when celebrating special occasions. Isn't lovely to share your own home surrounded by nature with your loved ones?
Property Appreciation
Aside from generating passive income, buying a second home can be a great financial investment. If the home is in a great location with the best neighborhood, you could sell the house for much more than you bought as its value increasing over time. Please take note that the price appreciation of a property can depend on the location, the physical structure, the demand and supply of property in a given location, and other factors that affect the value. You need to carefully find a profitable second home if you want to invest in it. In the long run, investing in real estate is still a good choice and it will give you a positive return if you decide to sell your home in the future.
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