There’s a growing trend in the real estate industry that’s worth taking note of. According to HomeLight’s Real Estate Top Agent Insights for Summer 2022, 64% of surveyed real estate agents reported seeing more buyers purchasing their second home first, usually in a more remote location. Now that people can work remotely, they no longer need to worry about how close they are to the workplace, so they’re eager to find a new home in a much more affordable area.
If you like the idea of buying a second home while still renting your current home, here’s what you should take into consideration.
1. Can You Afford Two Mortgages?
The problem with buying a second home while renting your current one is that you’ll have two mortgages. You may be generating rental income, but there’s no guarantee that the tenant will pay rent on time (if at all). You need to determine whether you can afford two mortgages, property tax, utilities, etc.
2. How Will You Save for a Down Payment
Another thing you need to consider is how you will come up with enough money for a down payment. Usually, homeowners will take out a home equity loan or a home equity line of credit to finance the down payment of the second home. Some other options include tapping into your retirement account, borrowing from loved ones, or doing a cash-out refinance.
Also, Check – 10 Insider Tips For Renting An Apartment In NYC
3. Get Your Current Home Ready for Renting
Even though there’s always a high demand for affordable rentals, some properties can generate more income than others. To maximize your rental’s earning potential, you’ll need to research first. You’ll need to figure out the going rate for a home in an area like yours, how many rental properties are available, how high the demand for rentals is, and more.
4. Decide How the Rental Will Be Managed
Managing a rental property can be quite time-consuming because there’s a lot to do. You’ll have to familiarize yourself with local and state landlord-tenant laws, prepare the house to rent, market the property, screen prospective tenants, collect rent, plus stay on top of maintenance, repairs, and paying bills on time.
That’s a lot for anyone, but it’s much more difficult for those purchasing a second home that isn’t in the same county or city! Thankfully, there are property management companies that will do all the hard work for you. Before hiring any property management company, you must do your due diligence to find a reputable office.
5. Have an Excellent Bookkeeping System
Even if you have a property management company to handle every aspect of managing your rental, you’ll still want to have an excellent bookkeeping system to keep track of every transaction associated with your rental. This will include rental income, maintenance invoices, utility bills, property taxes, etc.
Although house prices are far from affordable, real estate agents estimate that someone who buys their second home first can save up to $76,000. So if you’re on the fence about whether this purchasing strategy is right for you, just know that you could save a lot of money by going this route!