Whether you’re looking for an investment property or simply want a place to get away for weekends and holidays, the thought of purchasing a second home and living in Aptos on a part-time basis is exciting. But there’s more to owning a second home than simply showing up and enjoying the extra space. Be sure to weigh the pros and cons before taking the next step and looking at available properties. Consider the following questions before you begin exploring available Aptos real estate.
Am I willing to invest the time and energy?
Will I qualify for a second home loan?
In many ways the process of applying for a second loan is similar to when you received your first home loan. Your lender will want to know about your overall financial condition reflected in factors such as your debt-to-income ratio and your current credit score. They may ask to see recent pay stubs or tax returns to validate your income.
The key difference when you’re applying for a loan to purchase a second home is that these loans can sometimes come with higher interest rates and stricter requirements for approval. This is especially true if you’re purchasing a luxury property that may require a jumbo loan. It’s never too early to reach out to a lender to start the process of discussing what sort of loan you can qualify for and what amount you could receive for funding. Don’t forget that different lenders will offer different interest rates so set aside time to talk with multiple groups or banks to determine who can offer you the best deal.
How will I increase my ROI?
The answer to this question is different for every situation and is based on whether you want an investment property or simply want to have a second home for extra living space or vacations. Many people who will only live in a property on a part-time basis are interested in listing the home as a short-term rental during the times when they stay elsewhere. There are tax implications to this decision that will be discussed later, but this remains a great option for anyone who wants to make passive income on their property and is comfortable with other people staying in their home while they are away.
Also consider how your home may grow in value over time. Although the national housing market currently finds itself in a recession, home prices are still likely to grow over the long-term. If you want to accelerate your home’s growth in value, you can consider making small improvements to key rooms and fixtures. Lately the upgrades that have produced the greatest return involve making minor renovations to kitchens and bathrooms.
What are the tax implications?
Even if you don’t rent your home, be aware of a few unique tax requirements for owners of multiple homes. You can only write off the mortgage interest from up to $750,000 of debt. This amount represents a sum of what you pay on both of your mortgages. You are also limited to claiming $10,000 worth of property taxes between all the homes that you own, or $5,000 if you’re married but filing your taxes separately.
If you plan to list your home as a short-term rental while you’re living elsewhere, you must report the income if you rent the property out for more than fourteen nights during any given year. However, you’ll be able to write off your utilities and repairs on a prorated basis based on how many nights the home was occupied by tenants. You can also deduct any salary or wage that you pay for a property manager or communications assistant.
How will I maintain the property?
When you’re ready to begin shopping for homes for sale in Aptos, contact the Zech Real Estate Specialists to help you with each step in the transaction.They have helped countless buyers and sellers throughout Santa Cruz and Monterey counties and take great pride in serving each of their clients to the best of their abilities.
*Header photo courtesy of Zech Real Estate Specialists