Now that the economy has stabilized, you may find yourself among the many homeowners who have equity in their homes. You can either choose to leave that equity alone and let it continue to grow, or you may consider putting that money to work for you by investing in a second home that can be used to generate additional income.
While they do come with a certain amount of risk, investment properties can prove to be viable sources of income that more than pay for themselves over time. But it is crucial that you have the financial means to not only maintain a second home, but also to continue making mortgage payments on both homes in the event of an economic downturn, real estate market collapse, or if you are unable to rent it out for any reason. Once you have a substantial monetary cushion, you just might discover that the potential rewards of owning a second home may outweigh the risks.
Purchasing a second home in a vacation destination can be a smart way to draw weekly renters while also giving you the opportunity to utilize the property yourself for a portion of the year, which may have tax benefits. During the area’s peak season, you have the potential to generate enough income to cover the mortgage payments for the entire year, allowing you to offer it at a reduced rate during the off season.
Those with children going off to college may consider buying a home near the university so that their child can live there and other students can rentthe remaining bedrooms. Homes near major universities often have very successful rental rates with little vacancy.
In addition to the equity you have growing in your first home, a second property will give you the chance to accumulate even more equity. This is particularly true if the second home is located in a desirable location and if you are able to get a good deal on it.
A place to retire
If you plan to move when you retire, you might think about purchasing a home in that area now so that you can rent it out until you’re ready to make the move. Then when you retire, you’ll already have equity in your second home.
A home for your children
As discussed earlier, investing in a home near your child’s college will allow you to avoid paying rent for their housing. And if you can afford it, you may even decide to gift the home to your child someday in order to alleviate the struggles often experienced by new graduates.
Think an investment property might be right for you? One of our knowledgeable home loan experts would be happy to answer your questions. Call Cliffco Mortgage Bankers at (516) 408-7300 today.