Low mortgage rates—and the possibility of a fed rate increase in the near future—have many people thinking about whether buying a second home is a good investment. After all, purchasing real estate is a popular wealth building strategy. So does it make sense to invest in a second home? Here are some common reasons people decide to purchase a second home, as well as pros and cons to consider as you determine whether it is right for you.
Why People Buy a Second Home
If you are not from the Tampa area, having a home in this exciting Florida city makes it easy to get away and relax. With an international airport, plenty of fine dining, a bustling nightlife, a variety of creative outlets, great beaches, and gorgeous weather, it is no wonder that the area continues to grow in popularity.
With a second house in the Tampa area, you can enjoy weekends on the beach, escape the snow, and explore nature, theme parks, or galleries—your choice.
Some individuals living in the area choose to purchase additional properties in Tampa to turn them into rentals. With online rental platforms like Airbnb and VRBO connecting homeowners and potential renters, you can create a short-term rental that generates income or long-term rentals.
Turning Your Current Home Into a Rental
If you are ready to upgrade to a larger home or downsize into a smaller home once your kids have left the nest, then you may be tempted to turn your current space into a rental home. There is plenty of demand for single-family home rentals, making this an exciting reason to shop for a second home.
Flipping & Reselling
Flipping homes has become more popular over the past decade, and with plenty of older homes in need of an upgrade, Florida is a prime spot for contractors and DIYers to purchase real estate.
In most cases, real estate appreciates over time. Some buyers view purchasing real estate as an investment or a wealth-building tool because of this. It is important to note that despite the record-breaking increases in home prices over the past 18 months, real estate does not always appreciate quickly.
Pros & Cons
Pro: Rental Income
If you choose to rent your home, your income should cover the mortgage costs and more. You will also be able to deduct certain costs that you incur as a result of your landlord activities on your taxes.
Pro & Con: Being a Landlord
If you choose to convert one of your properties into a rental, you will either need to take on the role of landlord or work with a property manager to handle finding tenants, generating leases, fixing maintenance issues, accepting rent, and more. Not everyone enjoys being a landlord, so consider what will work best for you.
Con: Rental Restrictions
If you plan on using your second home as a short-term rental, make sure to look into any laws or community guidelines that may prohibit you from doing so or restrict the stay length of your guests. You can easily get rid of this con. Discuss your end goal with your Tampa Realtor, and she can help you find appropriate properties that work best for you.
Con: Double the Homeownership Costs
Owning a second home can effectively double your housing costs. If you have not yet paid off the mortgage from your first home and are not renting, you will have two mortgage payments in addition to two tax and insurance payments. In addition, you will be responsible for maintenance costs and utilities at two properties. Even if you intend to generate income from one of your properties by renting it out, you will need to be prepared to repair any issues and for times when it is unoccupied.
Before buying a second home, think about whether the increased costs will still allow you to reach your other financial goals like saving for retirement or investing money.
Pro & Con: Taxes
In some cases, purchasing a second home can allow you to increase your deductions on your Federal income taxes. On the other hand, if you are already deducting the maximum real estate tax on your Federal taxes, then there may be no additional tax benefit for purchasing a second home. You may also be able to deduct your mortgage interest payments.
To learn more about how your taxes may be impacted by the purchase of an additional property, speak to your accountant.
Con: No Guarantee on Rising Home Costs
There is no guarantee that home prices will continue to rise. If your main reason for purchasing a second home is to invest in real estate, you need to be aware of this. That said, because land is finite, real estate prices have generally increased year over year. This is more obvious in the long term.
Pro: Another Home to Call Your Own
Having your own vacation home that is perfectly suited to your needs and your lifestyle simplifies your getaways. Decorated with your own personal style and featuring the amenities that make you happiest, your vacation home will allow you to relax more fully and truly enjoy your time away.
If you are interested in purchasing a second home, let’s talk about your needs so I can share some exciting listings with you. Whether you want a beachfront condo or a large family home with an in-ground pool, together we will find the perfect second home.