Hi Folks,
A Happy Friday to All. In our continuing series of answering your requests, today, we will be covering the process of buying a second home or condo as either an investment home or as a vacation home. We have had numerous experts weigh in on the topic, and their comments break out into 5 main tips/categories:
Tip 1 - Location:
"Look for an area with tremendous upside", says
Jeffery Nielsen of MyntStyle.com. Nielsen says that he prefers to look for cities that cater to a large international audience so you are not, "tied to the economy of one country."
Nancy Clement, Realtor/ Dollar-Wi$e Divas Columnist, concurs, and advises, "Buy a second home in a location that has broad appeal and lots of people are interested in living in the area". Nielsen says that you must also see whether you walk to major conveniences, i.e., "Is there good public transportation nearby (not the bus)."
Tip 2 - Purpose of Home/Goal:
Karl J Trommler, Business Development Manager with PenFed Realty, says that you need to begin by asking yourself some questions: Is it "Truly just a vacation home used only by friends and family? An income property that we will use sometimes? An income property now that will be converted to a primary or secondary residence later? Am I looking for a long term or short term investment? Am I looking for a personal retreat, a source of cash flow, a tax shelter, future income (i.e. retirement)?", and that you should, "Decide what you can afford and be realistic.- Upfront costs and ongoing monthly".
Mike Smith of The Aliya Team/WEST USA Realty, says that, "Define Your End Goal. Is this second home/condo a retirement home or an investment or both? Defining this could make a big difference in what you buy. For instance, if this will eventually be your retirement home, you would want to pick a home near amenities that you enjoy (golf, tennis, hiking, etc...).You may also want to chose a single story home because climbing stairs may not be what you want to do as you get older."
Dina Goldentayer, Principle at The DS Team, Keller Williams Miami Beach weighs in and says, "Weigh the pros and cons of purchasing a home vs a condo. A full service condo can offer the the benefits of on-site security, which is vital to a residence that is vacant a few months per year. A home has added privacy, but added responsibility for upkeep of the grounds". Even more importantly, she says, "Consider the possibility that the home may become the primary residence one day, and this is especially important for Baby Boomers nearing retirement."
Tip 3 - Pricing/Finances:
"Sellers are expecting low offers. But how low do you want to go and at what cost? Appearing ruthless can ruin a negotiation to the point where a seller will no longer respond.", says
Kristen Maley, an Associate Broker with BJ Adams and Company. Trommler adds that you need to, "Arrange financing before you look. - This will be influenced by how you plan to use the property. Decide what data you need and where you will get it- Loan programs and rates, zoning, tax considerations, HOA costs if any, insurance costs. Brainstorm and make a list." Clement adds, that, "What financing is available for second homes and can you qualify to purchase? Get your loan pre-approved before you shop for a home as qualifying may be more difficult for you to obtain than is true for a person who plans to live in the home full-time." Anyone who purchases or has purchased a second home realizes that this is a vital point.
Tip 4 - Team:
Building your team is essential. Maley suggests that you, "Get a broker and go look", and to, "Get a lender to help you define your buying power - before the search", and to, "Look past the circa 1973 rock walls - these are the properties that make for a good deal. The market has forced them into the lowest price ranges. Don't be afraid to take on a project in a second home." Smith adds that you, "Consult a Tax Advisor. The tax implications could be devastating if you don't collect all the facts". Sound advice!
Clement also suggests that you, "Hire a good property manger and have the person not only collect rent but do an interior inspection at least quarterly. That way you will be aware of any potential and costly problems the tenants may not want to tell you about, like a leaking toilet that could lead to an expensive to repair problem like water intrusion that could lead to a problem with mold.". Obviously, if you have tenants, this would apply, but sound advice, nonetheless.
Tip 5 - Costs:
Trommler warns us to, "Plan for unexpected costs- Repairs now and ongoing repairs and maintenance", and Goldentayer similarly states that, "Consider carrying costs and maintenance fees of a condo building, especially if it is only a part time residence."
Patrick Hohman, a 22-year Association President, advises that, "Primary tip for condo buying, is to check the difference between what SHOULD BE in the Reserves NOW, as opposed to what is actually there. Otherwise, potentially big special assessments or even worse, maintenance is neglected and property values tank."
Overall, your strength is in your team and your dedication to the details. Do you have any additional tips to add that would be helpful to others? Please comment below.
Have a Great Weekend, and Happy Rent-to-Owning !
