Owning a second home allows people to live an enhanced lifestyle, either in another country or a different domestic region. According to a report released by the National Association of Home Builders (NAHB), second homes make up over 5% of homes in the housing market. In the United States, the largest percentage of second homeowners reside in California, Texas, North Carolina, Pennsylvania, and Michigan. Before investing in a second home, however, there are many things to consider, such as long-term usage. Some people use it as a vacation house, others make a side hustle by renting the property.
As second homeowners, all of the financial responsibilities of a typical homeowner are doubled. For instance, if there is a sewer, water, or trash problem, the homeowner is responsible for researching bids and paying for the contractors. In addition, they are responsible for monthly and annual bills such as insurance, taxes, and maintenance costs. In general, investment advisors encourage homeowners to jump into buying a second home when they meet the following specifications:
- They can save at least fifteen percent of their current monthly salary for retirement
- They already have nine months saved for an emergency fund
- They do not have any other debt and their current home is paid off
- They have established funding for their children’s college education
Owning a second home comes with extra expenses, and it’s important to have a realistic picture of what that entails. If you are choosing to stay in your primary residence for the majority of the time, make the second home earn money by renting it through marketplaces such as Airbnb. Using a third-party platform ensures that the potential renters have gone through a vetting process and it provides some assurance if there is damage to your home throughout their stay. Depending on the location of your second home, it’s important to follow all laws and regulations surrounding guests and visitors.
Owning a second home is a trend that has been on the rise for the past decade. Numerous factors inspire people to take the plunge, such as saving money on travel destinations they visit frequently. However, there are various factors they should consider before thinking of buying a second home, such as the rate of saving, absence of all other debt, and availability of an emergency fund. In addition, second homeowners are responsible for all the financial needs of both homes, such as utility bills and insurance.