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Real Estate: Second Homes

The message delivered to the 2011 Realtors® Conference & Expo over the weekend was, “A diverse set of buyers and property types comprise the second-home sector and opportunities for second-home buyers exist in nearly every market, even in nontraditional, non-resort markets.”

Many people investigating the real estate market in Big Bear are looking for getaways close to home. Your second home is an investment that should be carefully analyzed. Ask yourself the following questions:

  • Do you plan to use it for vacation, extra income or retirement?
  • Is it time to invest your disposable income?
  • Do you want to drive or fly to your second property?
  • How often do you expect to visit?
  • Is rental income a requirement for a successful mortgage transaction?
  • Can you afford up-keep expenses, insurance and taxes?
  • Are you looking for a single family home or a Condo?
  • What kind of price appreciation can you expect?

When purchasing a second home in Big Bear, your financial institution may perceive a greater risk, spreading your finances too thin and raising the probability of default in a tough economy. A larger down payment may be required and you may be assigned more points than your primary residence. It is pretty common to have to put at least 20% to 30% down in this lending climate.

Tax deductions will depend on whether you’re planning on generating income through rentals or keeping it for yourself. If it’s used as a second home, the deduction rate for interest on the mortgage will be similar to the rate on your first home. We recommend that buyers speak with their tax advisor to get the most reliable tax advice.

Expect to face increased insurance premiums on your second property. If the home is for vacation purposes, it will be unoccupied much of the time, raising the chances of things happening while no one is there. Renting your home can also raise your insurance premium due to the perception of increased risk.

Don’t make any rash decisions, take your time. See your second home as an investment to be carefully considered prior to purchasing. Once you’ve done your research, let us know if we can help.

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