Investment properties are on the up for existing homeowners. Did you know that more than 65% of homebuyers are very likely to buy a second investment property within a couple of years? The reason for this is because the second home is a big investment that can bring in a lot of money. Some people buy one to be able to fix it up and sell it on for more, where others will buy one to be able to rent out to tenants. Not everybody is cut out to be a landlord, however, so those who do this get property management teams on board.
Understanding how to make a second home an investment for you starts with asking for help. International investor services are easy to use if you are buying from abroad, but what makes buying a second house such a great addition to your portfolio? Below, we’ve got 10 reasons that you should invest in a second home as soon as you have the income to do it.
- Inflation protection. As an investor, the big concern is about the potential for inflation rates to go through the roof. One of the best ways to make sure that you’re not hit by a sudden surge of inflation is to buy a second home. Houses tend to stay stable, and the more the prices rise, the more your house will be worth. Even if you currently have other investments such as stocks and bonds and they take a hit because of inflation, you’ll be able to earn back the lost income by renting out or selling your second house.
- It’s a great way to earn extra cash. It’s always a big investment to buy a house – whether it’s your first house or your second house – but the return of investment on that home is worth it. There’s a potentially huge payout that comes with having a second home, and as your property appreciates in value, you’ll be able to leverage this and gain great returns on the initial investment that you made. Your home could also appreciate in value if you invest in renovations. It’s a double whammy on the investment that you’ve made.
- It’s secure. There are so many investment opportunities out there, most of them are quite volatile. In spite of what you may think, the Real Estate market is one of the most secure markets you can ever invest in. More people are beginning to see that buying a house is far better than renting, and then matter the current economic climate, there will always be a need for someone to live somewhere. When you own a second property, you’ll always have something you can sell in case of an emergency.
- You can buy when the interest rates are low. You can wait to buy your second home when the interest rates are favorable, and when you do this it’s a great incentive to buy an investment property. With mortgage rates on the decline, the time is now a strike while the iron is hot. You’ll be owing less initially on your mortgage down payment, which also means you could even end up buying multiple properties during this time.
- The security for the kids. To be fair, you may not choose to have children, but if you do, a second home or something you can pass down to them. So many parents panic about whether or not their children are going to be financially stable in the future, but you won’t have to worry about that. Whether you sell the second home as you get older and pass the profits of the kids, or you allow them just to take over the deed, you’re so much better knowing that there is something to take care of long after you’re gone.
- You avoid the risk. There are lots of investments out there that you can make, and some of them come with serious risks. There are investments out there that can subjected to things called margin calls, which can be incredibly costly. A second home helps you to avoid this.
- Tax benefits. Nobody loves to give half of their income away when it comes to tax season and a second home can help you with that. There is a bigger chance to take on more tax deductions because of mortgage insurance as one of the values of your property. You might even be able to defer the liability through an exchange. Speak to your accountant and see what your tax liabilities are with your second home.
- Rents are on the up. Rental amounts are increasing, and while you may be happy to keep your rent below market, you could choose to up the rent and ensure that your home is paid off sooner. It’s an excellent financial decision to rent the house out to others, because they are the ones you take over the mortgage on your behalf.
- Retirement planning. Over the years, the tenant would be paying off your mortgage for you so by the time you go to retirement the house is fully paid off and in your name. Consider the investments that would appreciate and not just pay you a monthly dividend.
- It’s a passive income option. Passive income is actually one of the most popular ways to have an income these days, because so many people are trying to do more than just live hand to mouth. You can outsource the care taking work to contractors and you can rent out your property when you’re not there. You want to pad out the income you already make with an investment that doesn’t require much time and effort, and you can hire property managers to do everything for you so really, you can just collect the payments.
Buying a second home is always a good idea if you’re looking for a way to bring in more income. Now that you know the 10 reasons to go for it, it’s time to have a chat with your mortgage adviser.