Buying a second home isn’t just for the wealthy. It is a perfectly attainable goal for regular, working-class Canadians. However, it is a big deal and not something you should take lightly. Have you been watching too much HGTV? Or has a friend been telling how much you can make on a rental property? Whatever the reason is, there are a few key things you need to consider before taking the plunge into multiple home-ownership.
Why are you buying a second home?
The number one thing you have to ask yourself is “Why?”. Why are you thinking about buying a second home? Are you looking for a vacation property? Do you love heading to cottage country on the weekends? If that is the case, wouldn’t renting a cottage in the summertime be enough for your needs?
Is it an investment property you are after? Have you given real thought to what you want to do with those funds?
Keeping up with the Joneses is not a good reason to add a whole house into your asset pool. You really need to dig deep to determine why you want this.
Can you afford this now and in the future?
So you’ve got some savings, or some liquid cash coming your way. What about in 3 years? What if you lose your job? Or if interest rates go up? Just because the math works out now for you to purchase that second property, doesn’t mean it will always be that way. You have to have a contingency plan in place. And that doesn’t just mean sell it. If the market does take an unexpected turn, which is possible, it may not be easy to just offload the house. If you are considering this for a rental property, you have to consider the possibility of less than ideal tenants that could let the rent go unpaid or cause damage to the unit.
The best case scenario is that you have enough cash on hand to pay in full. Now, that’s a lot. But it is the least risky approach to being able to afford that second home.
Is it really worth it?
Once you’ve worked through why you really want the property, what it is going to be used for, and if you really can afford it; you have to ask yourself if it is worth it. In all likelihood, it is going to cost you more than you think and then it is going to take longer than you estimate. If you have enough in savings or in income than it could be totally feasible for you. If not, then it might be time to put the idea on the shelf.
If you aren’t sure if you are ready for a second home and would like to talk to a professional about it, contact Martin MacFarlane today.