What to Know Before Buying a Second Home

  • Michael Maze
  • 10/1/21

Is buying a second home on your agenda in the coming months? Whether you are interested in purchasing Burlingame homes for investment or enjoyment purposes, there are some things you need to consider beforehand to ensure your home-buying process is a success. Here are some of the most important. 


How Much You Can Afford

Before you move forward and purchase Burlingame real estate as a second home, it’s vital to consider the full financial impact of your decision so you can decide how much you can reasonably afford. Not only will you have to make a down payment and cover closing costs on the property, but you’ll also have to pay for another insurance policy, taxes, HOA dues, utility bills, and any repairs that need to be done. Before you start looking for homes, write out a detailed budget that includes all the new expenses you’ll have to cover when you buy your second house. This will help you get a better idea of how much you can spend on a house (or if you can afford to buy a second home at all.) If you’re still paying off your first home, have a lot of credit card debt, and don’t have much in savings, you may need to hold off until you’re in a stronger financial position.

How You’ll Pay For It

Now that you know how much you can spend, it’s time to figure out how to pay for it. In most cases, this will involve taking out a second mortgage. While this process is similar to obtaining a mortgage on a primary residence, there are some key differences. First of all, you’ll have to prove that you can pay both mortgages and any associated expenses before you will be granted a loan. Secondly, a mortgage on a second property will likely have a higher interest rate than on Burlingame homes that serve as primary residences. You may also have to come up with 20% down on the home and prove that you have adequate cash reserves to cover two mortgages for an extended period of time, if necessary.


What You Want to Use it For

Knowing what you want to use second Burlingame homes for will help you and your agent determine which properties best suit your needs. For example, if you want to use the property mainly as an investment and will be renting it out, you will want to have renter-friendly amenities such as access to nearby restaurants and grocery stores and enjoyable outdoor spaces. You’ll also want to make sure you buy in a neighborhood that does not have restrictive covenants that prevent you from renting it out via Airbnb or other services.

If, on the other hand, you will be using it strictly as a vacation home for you and your family, you can choose properties that are more based on your unique tastes and needs. Talk with your Burlingame real estate agent about what you will use your new home for so he or she can narrow down the list of available properties to match your needs.


Tax Consequences

What you plan to use your second property for will have tax implications and this is important to take into consideration before you buy Burlingame homes. The IRS makes a distinction between personal residences and rental properties. If you limit rentals to 14 days or fewer throughout the year, the home will be considered a personal residence and you will not have to pay taxes on rental income and will be able to claim the mortgage interest on your taxes. 

If you rent it more than 14 days per year, you won’t be able to claim the mortgage and will have to pay taxes on rental income, but you will also be able to claim losses if the amount you spend on maintenance, repairs, or updates is more than your rental income. Make sure you work with an experienced accountant to ensure you understand the full tax consequences of your purchase.


Your Future Plans For It

You may know what you want to use your Burlingame real estate for now, but what does the long haul look like? Do you plan on keeping it for the foreseeable future and possibly passing it along to your kids as part of your estate? Or do you want to consider selling the property after you make a few improvements and it gains value? When you put some thought into the future and your goals for the property, you can better choose a home that will help you achieve those goals.

You Need to Work With an Experienced Burlingame Real Estate Agent

An experienced local real estate agent is your best friend when you start looking for Burlingame homes to buy as second houses. Your agent can help you determine your budget and goals, find properties that match your needs, and assist you in creating an offer that appeals to sellers. This is especially important in today’s Burlingame real estate market that is heavily in favor of the seller and where inventory is limited. If you’re unable to find and buy one of the homes that are currently on the market in this area, your agent can also help connect you to owners who are selling their homes off-market and not advertising them to the general public. This will increase the number of options available to you and increase your odds of success.


Ready to start looking at houses to buy as second homes? Doing your homework before you buy will help you understand what type of property you need and help you better achieve your goals. Reach out to one of the trusted Burlingame real estate agents in the area such as Michael Maze for expert guidance throughout the buying process.

 

 

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