Why a second home is a good investment this 2023
Making a bid for a second home is a great idea to consider, whether you plan to have permanent accommodations for your family or solo vacation getaways, a place to retire in, or a profitable real estate investment.
The demand for properties of this nature has been growing steadily in recent years, driven by high net-worth buyers, professionals working remotely, and individuals with steady income and savings. Not only do these people see the benefits of adding these real estate assets to their portfolio but they have also seen the handsome returns on their respective investments.
To fully understand why investing in a second home matters, below are some of the top reasons for doing so.
RENT INCOME POTENTIAL
There’s a reason why a property such as this is called a second home: the homeowner has a primary residence that they live in permanently while the second home is where they go on certain occasions only. During those times when the homeowner isn’t using it, they get the opportunity to generate extra income from it by turning it into a rental. The profit can be used to pay mortgage and maintenance expenses. Rental income also helps mitigate depreciation costs over years of ownership.
However, there are things to consider before turning your second home into a vacation rental. This means knowing the local ordinances, laws, or permits governing short-term rentals in the area. In Texas, for example, there are no statewide rules but each county is allowed to impose its own. A residential unit in Brazos County can be rented out for less than 30 consecutive days.
Owning a second home comes with some tax breaks and deductions. Note that there are some tax benefits given to an owner of a second home, provided that the owner resides in their second home for more than 14 days a year.
For second homes being used exclusively for personal use, the homeowner can get a mortgage interest deduction of up to $750,000 for single owners or married couples filing jointly. But if the married couple files separately, the limit is up to $375,000.
Moreover, owners of second homes being rented out for 14 days or less annually are not required to report the rental income to the IRS.
Real estate investments add luster to your asset portfolio on top of other financial instruments like stocks or bonds. Diversification in your investments allows you to hedge against the more risky ones and ensures more stable earnings no matter the market climate. Real estate for one, is an investment that keeps on appreciating over time despite economic upheavals. That’s why even if you’re buying real estate simply as a legacy investment, this is a valuable asset that you can pass down to your heirs.
A PERMANENT VACATION HOME
Owning a second home means going for a vacation without the headache of planning where to stay and paying huge rental or accommodation rates. This is your home away from home where you can cook meals and sleep in beds that you own. And if you already have your vacation items (e.g., swimming gear, camping equipment, bikes, etc.) stashed here, you won’t need too many things to bring along as you travel.
And when you own a second home, time won’t be a factor. You can stay as long as you want and have the freedom to invite friends and family over to unwind and relax with you. A second home gives families the opportunity to spend quality time together. This family bonding experience is far more valuable than the cost of the vacation itself – and you have just the venue for this.
BUILDING WEALTH FOR RETIREMENT
Buying a second home is not only for a change of scenery, but it is also a sound retirement strategy. Acquiring a second home before you retire can give you a headstart in building equity. If you decide to rent out your second home to vacationers, you can use the income to live out your dream lifestyle during your retirement years.
Home buyers acquire second homes in prime spots surrounded by natural beauty or a location with high tourist arrivals. Given these distinct characteristics of second homes, their value can be amplified over time. When the time comes for you to put your second home on the market, you will reap the rewards of your investment.
When looking for a second home as a personal getaway or as an investment asset in Brazos County, TX, work with Berkshire Hathaway HomeServices Caliber Realty. Start your property search today! Call us at 979.694.8844 or send an email here.