Mar 23, 2015
Thinking about purchasing a vacation home on the beach? Before you start searching for your second home in Hilton Head, here are a few questions you should ask yourself.
1. Why do I want to buy a second home?
If you are purchasing a second home, are you doing it just for investment purposes? Are you planning to use it as a vacation getaway? Do you want to retire there? Make sure you set realistic expectations about when and how often you will occupy the home.
2. What if prices start to drop?
Future values are always difficult to predict, as they fluctuate over time. What seems like a bargain today may not turn out to be that great of a deal a year from now. Buy the home only if you plan to own it for at least five to seven years.
3. Can I pay with cash or do I need to finance the second home?
About one-third of vacation home sales are paid with cash. This can increase your chances of getting a good deal on the home, as sellers generally prefer cash. Even if your cash bid is lower than the other offers, some financed deals can fall through. For a mortgage, you’ll probably need to put 20% down, and the total cost for your primary and vacation homes should be no more than 33% of your gross monthly income. Consult with a local mortgage lender before you decide.
4. How much will this second home really cost me?
In some vacation destinations, home insurance can cost up to four times more than that of your primary home. You occupy the home less often, putting you at potentially greater risk for theft or damage, and many vacation homes are in flood- or hurricane-prone areas. Get quote from an insurer before you make an offer. Property taxes also vary greatly by state, so consult with a local tax expert. Consider the cost of homeowners association fees and other costs associated with the community you’re searching in. Ask a real estate agent what to expect as far as total costs to own your second home.
5. Is this home affordable without rental income?
Second-home-buyers are often overly optimistic about how much they can earn from renting out the home to vacationers. Play it safe: budget to cover the cost of the home with your own funds. Think of any rental income as icing on the cake.
If you want to make a little piece of The Island your own, you need more than just a road map and a REALTOR. You need a partner who can make things happen.
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