Pros and Cons of Buying a Second Home for a Vacation Home or Rental Property

Owning an additional house comes with both tremendous benefits and responsibilities. With a second home, you have an opportunity to vacation, enjoy life in another part of the country, and earn passive rental income. These benefits are balanced by tax implications, landlord issues, and more.

If you’re determined to be the owner of an additional house, you’ll be joining millions of others in the country. However, before you take the plunge, be sure you’re ready for all the responsibilities. Here are some important pros and cons to consider before buying a second home from the pros here at McGraw Realtors.

6 Advantages of Having a Second Home

1. A Home Away from Home

If you’re looking forward to weekend getaways to the lake, week-long vacations to the country, or an excuse to buy waterfront property in places like Hot Springs, AR for spa time, a second house can become your home away from home. It will become your place to recuperate, relax, and re-energize in a familiar space that always stays special. For children, it’s the magical place you take them to make family memories. Celebrating holidays and other special days become that much more special at your home away from home, a place that your family and friends can share exclusively.

 2. Long-Term Profits

Any investment you make can fluctuate in value, but real estate typically rises over time. Even a vacation home that you never rent out could help you build wealth over a period of years. Unlike other assets, a vacation home is more likely to appreciate because there will always be a limited supply of homes in that particular area. Even though there is no guarantee that the property will be worth more when you’re ready to sell, it is very likely it will, especially if it’s a luxury home.

 3. Convenience

The ability to choose, at a moment’s notice, between two homes to live in can be extremely convenient. If you redecorate or remodel one home, you can simply live in the other home until the work is done. The same thing goes if a storm damages one home or causes a power outage. If you or your spouse must change jobs, choosing from two locations instead of one is extremely convenient. A second home can also be a handy place to store things you would only use on vacation to begin with.

4. Tax Deductions

If you rent out your second home for two weeks or less per year, its mortgage interest and property taxes can be deducted from your gross income. Some financial experts don’t advise buying a second home if you’re still paying on your first or are unable to pay cash for a vacation home. But every tax situation is unique, and it’s worth talking to your accountant for more specific guidance.

 5. Rental Income

Many owners of a second home choose not to rent out their property, but if you decide to do so, you can deduct all operating expenses of the home including repairs, supplies, utilities, cleaning fees, lawn maintenance, management fees, and more. Renting a second home out for more than two weeks a year can bring in hundreds, even thousands of dollars a year, even if you have a mortgage on it. 

6. Short-Term Profits Through Flipping

Flipping a house can be a fantastic way to generate money, if you’ve done your homework and you’re ready to put in the sweat equity. If you have the patience and skill to flip a second home, you may end up finding yourself enjoying the house for a little while, then enjoying the profits when you sell it.

5 Cons of Buying a Second Home

1. Serious Financial Concerns

There are a number of important questions anyone looking to buy a second house should ask themselves. Is your current home paid off? Is your credit card debt at a minimum? Are you saving at least 15 percent of your current income for retirement? Do you have an emergency cash fund saved? Have you started a college fund for your kids? If any of these questions raise a red flag, you might not be ready.

2. Upfront Costs

Vacation spots, where people often look to snatch up a second home, typically come with a higher price tag. If you’re looking to immediately rent it out for weeks at a time, the initial cost of furnishing the home is an added expense often overlooked. Consider how to negotiate the best price to balance these issues.

3. Renter Headaches

Rental income is no guarantee. Even with money coming in monthly, trouble can develop. Cleaning services and general maintenance are expenses that can add up. Sadly, tenants potentially can do a lot more damage to someone else’s property than they ever would if it was theirs, and a deposit can fall woefully short of your repair expenses.

 4. Maintenance Issues

When you go from owning one home to two, you double your maintenance issues. If a window breaks or a garbage disposal stops working in your second home, you are the one who has to schedule the repair. If any repair concerns pop up at all, it’s not the renters who ultimately have to get it fixed. It’s you.

5. Travel Time

Most of the time, a vacation home will be hours away from your first house. The excitement of enjoying your beautiful second home the first few visits will outweigh the time it takes to get there. Since you’ve spent all the time and money to have a second home, you’re likely to visit many times. After a while, the newness can wear off and the time it takes to get to your second home can become tiresome.

Get Expert Guidance on Finding the Perfect Second Home   

Locating the right second home for your needs is simple when you work with the right team. Our McGraw REALTORS have the extensive network and savvy brokering skills to make your real estate investments a delightful experience from start to finish. Let us help you find the right home for you.

12 Things to Know When Choosing to Buy vs. Build a New Home

Whether you’re a first-time home buyer or a luxury home seeker, a vacation home buyer or an investor, one of the most crucial decisions you’ll make is whether to search the market for an existing home or build a new one. 

Both situations have their benefits and drawbacks. But you may be surprised to learn just how advantageous it can be to buy an existing home with McGraw Realtors instead of investing in a new build.

Here are 12 factors to consider when deciding to purchase an existing home versus having one custom-built.

1. Easier to Negotiate Your Ideal Price

When you’re looking to buy an existing home, offering a lower price than listed is expected—allowing you to maximize your budget, even for a luxury home.

There normally isn’t much opportunity to bargain with builders. When it comes to getting a perfect price, purchasing an existing home is your best bet.

2. Much Less Stress

Building a house comes with many decisions. What land do you purchase? What style of home? Should you choose wood flooring, carpet or tile? What about the fixtures, cabinets, and countertops? This can feel overwhelming.

Fortunately, many of the elements you desire most can be found in existing homes. And if some changes need to be made, they may be negotiable with the seller. 

3. Wealth Building

Luxury homes in an already established area tend to rise in value, allowing homeowners to build wealth over time. 

Compare that to new builds, which tend to be erected in areas without any history and no guarantee of growth. Such homes can lose 10% or more of their value at move-in, instantly trapping a homeowner in negative equity. 

4. Calm vs. Chaos

If you’re able to afford a custom build on acres you have to yourself, consider yourself fortunate. Most new builds happen in newly formed neighborhoods, which means you’ll be living in an area where other houses are still being built. 

This means enduring noisy workers, traffic diversions, muddy streets, and other annoyances. Things will eventually calm down, but until then, you’re likely to be living in a construction zone.

This isn’t the case when you purchase an existing home in an established neighborhood, which will likely be much calmer right from the start.

5. No Hidden or Unexpected Costs

When you’re looking for your first home, finding a house with everything you want may take a while, but when you do, you can bid on it. Your walkthrough, along with inspections, typically reveals what you need to know—eliminating unwelcome surprises.

However, the upgrades that can be made as you’re building a house can initially seem small, but they add up to serious expenses. That, plus unexpected setbacks in the construction process, can make the overall cost higher than you initially expected.

6. Shorter Wait Time

If you’re looking to live on waterfront property, it can take months to construct a new house. It is possible that you’ll have to make living arrangements if you sell your house quicker than expected. 

A home that has already been built and is part of a lakeside community can be much quicker to move into, so you can start enjoying the relaxing atmosphere of lake life right away.

7. Convenience vs. Customization

If you’re looking for reasons to invest in a vacation home, one huge reason is convenience. A home that is already built in a community with considerable existing amenities is extremely appealing. 

Building a home means waiting until the house is finished before you can enjoy the community it’s in. If the area is still being developed, amenities may be limited compared to what you find in an established neighborhood. 

8. Low Maintenance

Home buyers often don’t have the luxury of making repairs immediately after moving in, which can make a new build appealing at first. 

Keep in mind—while new homes certainly have new features and fixtures, an existing home can have those things as well. You simply need to make smart buying decisions to find your perfect home.

9. Lower Energy Costs

A home that helps you save on energy usage and costs is always a plus. A newly built house often comes with the latest energy-efficient systems and materials, which leads to lower energy bills. 

But a luxury home that has already been built can also have the state-of-the-art eco-friendly systems also. 

10. Still Provides Newness

Being the first owner of a custom-built house with all the latest gadgets, finishes and fixtures is like nothing else in the world. But being the first owner of a home often comes with a higher price tag.

For first-time home buyers, retirees, landlords and investors, it’s often worthwhile to look for an existing house that has freshly upgraded features—providing newness without the added cost of a new build.

11. Better for the Environment

Buying an older home can have an advantage over building a new house in terms of eco-friendliness—because no new materials are needed. 

Investing in an existing house means you’re helping to protect natural resources, while eliminating the need to dispose of materials used during construction.

12. Recouping Your Investment

With a new home build, you can limit the high-end features you install. This reduces initial costs, but can make it harder to sell the home later on.

Often, you can find an existing home that has everything you desire for a price you can live with. In the long run, this may boost your long-term return on investment.

Find Your Ideal Home and Love Your New Lifestyle   

Whether you’re a first-time buyer, an investor, a retiree, or a family seeking a vacation spot on one of our area’s many lakes—there is a perfect home out there waiting for you. 

At McGraw REALTORS, our broad network and savvy negotiation skills makes the process of locating your new home a streamlined, stress-free experience. Reach out to us and let us know how we can help you get into the home of your dreams. 

11 Pros and Cons of Purchasing a Home with Land

If the fast pace of city life has you stressed, and moving to the great wide-open sounds like heaven right about now, you may be on to something. Every day, people leave crowded living spaces behind to enjoy a home on tons of land.

But before you load up your belongings, take a few moments to consider the pros and cons of purchasing and living on numerous acres. After all, for as many benefits you think there may be to living in the country, there are just as many challenges that go along with it.

Check out our Home Buying Guide for home purchasing tips, and read on for what country life is like.

The Benefits of a Home with Lots of Land

1. Ample Space

Obviously, the greatest appeal of living on many acres is the amount of space you have to yourself. You might be blessed to have half an acre in the city, but in the country, you can purchase a dozen or more acres. 

You can use the outdoors for fun that cannot be rivaled. Roasting marshmallows on the fire and looking at the stars on a warm summer night is magical when you’re far away from the rest of the world.

2. Gorgeous Nature

When you live in the city, you’re lucky to see any wildlife walking across your property. You may not have a lot of room to add trees, terraces, or other attractive natural features. 

But when you own plenty of land, you can plant trees or do any creative landscaping you want. And if you have land located directly on a beautiful lake, you have a relaxing space that can make you feel like you’re perpetually on vacation. That’s just one reason why buying waterfront property is so appealing to so many.

3. Fresh Air

If you’re ready to leave behind the smell of car exhaust and the ozone pollution of the city, purchasing a plot of land out in the country is an awesome experience. Sitting on a porch and breathing in a literal breath of fresh air is priceless.

4. Appealing Price

In most cases, land in rural areas simply doesn’t have the same price tag as it would in the city. The amount of money you can save purchasing land in the country can be used instead to help you build a significantly larger house that wouldn’t be affordable closer to the city.
The right home in the suburbs can also give you more space than you have in the center of a city, at an affordable price.

5. Plenty of Privacy

With a home surrounded by acres of land, you can enjoy the feeling of owning a space that others can’t easily intrude upon. You’ll be miles from another homeowner, and that means a lot of privacy, as well as peace and quiet.

6. Additional Income

You’ll also have the unique benefit of making extra income from the land you live on. An apple orchard, pumpkin patch, or strawberry field can bring in quite a bit in sales. You could also raise chickens for fresh eggs, or sell or raise livestock when you have the right amount of acreage.

The Challenges of Owning Lots of Land

With all the benefits that come from owning numerous acres, there are a few challenges to understand so you can make the purchasing decision that’s best for you.

7. Land Maintenance and Upkeep

The more land you have, the more you have to maintain, which can be complicated and time-consuming. For instance, you’ll have hours of mowing to do, and lots of trees to keep trimmed. It’s costly, and it can be difficult to hire caretakers if you live far away from town.

8. Distance from Amenities

Having lots of acreage means that everything you do beyond your home requires a special trip. Groceries, gas, going out to eat, or getting outdoor supplies all take special planning and typically involve a lengthy drive.

Living on a lake can make up for this, but only if you’ve thought out the questions about lake life first.

9. Commute to Work

You’ll also likely have a long commute if you don’t work from home and aren’t ready to retire. Even for those who do have working from home as an option, high-speed internet isn’t as likely to be available to you because you live so far away from everything. 

For this reason, many people end up preferring a home conveniently located in areas like midtown Tulsa.

10. Difficulty with Utilities

Living far from town can sometimes mean having difficulty with smaller utility companies that aren’t as reliable. Sewer, gas, and water capabilities are things you take for granted when you live in thriving municipalities. That will change in one way or another when you start living on several acres, where the rules are different than they are in the big city.

11. Issues with Wildlife

Another challenge you may not immediately consider is that not all wildlife is cute and cuddly. Bears, mountain lions, deer, coyotes, snakes, and other wildlife are normally more afraid of you than you are of them, but living on an acreage far out in the country puts you in their territory, not the other way around. 

You may frequently come in close vicinity to such creatures. That means you must be ready to adopt a different mindset than you may be used to, with a specific set of rules that must be obeyed to protect you and your family.

Find the Perfect New Home—No Stress Required 

After weighing all the pros and cons, it’s no surprise that so many people are drawn to the idea of living far outside of town. Working with a great real estate agent who is looking out for your interests can turn the home buying process from a chore into a delight.

When you’re ready to make your move, our REALTORS will make the process simple. Tell us your dreams and preferences, and we’ll leverage our extensive network and local expertise to find you the perfect home, stress-free.

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