A lot of people would love to have a second home. A favorite vacation spot seems like a natural place to invest your time and money. You’re not alone in wanting to buy a home in your favorite holiday spot, 1.13 million vacation homes were sold in 2014, and made up 21 percent of total real estate transactions. Florida is a very popular state for people to buy second homes, but it is also one of the states with the highest foreclosure rates in the nation.
Possibly the biggest factor in purchasing a second home in Florida is your income. Simply put, if you have money to spend on a second mortgage, and Florida is where you want to spend your money and time, you also need to consider some other factors before you decide on that second home.
- If you’re buying a second home, you already know your way around the merry-go-round. You understand realtor fees, closing costs, points, and other minutiae that goes with house hunting. But what about the other expenses that you will incur from month-to-month such as the nearly universal need for flood insurance and windstorm damage insurance? Talking to an insurance professional will give you a better picture of insurance expenses.
- If you are buying a second home odds are that you are in your 50s or 60s, and possibly contemplating this as a warm weather “snowbird” home, and possibly as your principal retirement residence. If you are under 50 you may be contemplating this as an investment property which will be rented out at least part of the year. Either way you need to prepare to lose some of your financial flexibility with the purchase of this home. If you will be renting it out that potential income can be considered by your lender when issuing the mortgage, but you will also need to consider the time it will spend vacant, as well as management and maintenance fees.
- Location, location, location. With the advent of rental services like AirBnB and VRBO, it’s possible to “rent the runway” by staying in neighborhoods that you think you might be interested in. Once you get out of the resort areas and hotels, you can get a real feel for a neighborhood by spending a week or two as a local instead of a tourist.
- If you want to purchase a home in a premium area, but do not have the premium dollars to do so, then fractional ownership is always a possibility. If you have good friends or family members who vacation in the same area with you, then sharing the cost of a home in a prime area could be a great way to access a hot neighborhood, without the smoking price tag.
If you do decide to buy your second home in Florida, E & L Insurance will be happy to help you arrange the insurance coverage that will protect your investment, your future vacations, and your dream retirement.