homebuyer

Why Buying Your Second Home First Isn’t The Craziest Idea

By Tanya Svoboda
March 2020

Homeownership and the American Dream have historically gone hand in hand. However, some first-time home buyers are finding that achieving that dream can be challenging. Obstacles like high student loan debt or living in an area with prohibitively high median home prices can make it difficult to buy a home.

Homebuyers that don’t want to delay purchasing property are getting creative with their approach, especially those that live near large cities where real estate can be pricey. These savvy first-time buyers are renting their primary residence and purchasing their “second” home at the same time. And it’s not as crazy as it sounds.

Think that renting where you work and buying where you vacation might be an option for you? Consider the pros and cons.

Pro: Rental rates may be more affordable where you live, but owning property remains a smart investment.

Owning a home is still a goal for many. Yet, for Millennials, renting is more affordable than it was for Gen-Xers or Baby Boomers, and according to CNBC, they’d need to save 6.4 years’ worth of their total annual pay to afford a down payment. So why not do both? In high priced cities, it can make financial sense to rent where you need to live and to buy where you want to do your living.

Plus, there are perks to homeownership. The Urban Institute issued a report showing that homeownership creates equity and provides tax breaks that renting doesn’t. And National Association of REALTORS®’ Chief Economist Lawerence Yun states “Property values have grown over time. The price appreciation can provide equity for trade-up purchases.”

Con: You may need to put more money down and pay a higher interest rate for a home that you don’t live in full-time.

Purchasing a second home while renting your primary residence can be considered a bigger risk by lenders who fear it would be easier for homeowners to walk away from a house they don’t live in full time. However, it’s not an insurmountable issue. Yun shares that, “the down-payment requirement (for a second home) will likely be a little higher, as will the interest rate on the loan.” Plan accordingly during your home search.

Pro: Your second home can be a second job…in a good way.

Renting your second home during the times when you aren’t using it is a great way to help offset the mortgage and upkeep. Home-sharing sites like Airbnb and VRBO make renting your second home simple and give you an opportunity to turn your home into a business. Some states have regulations surrounding property ownership and short term rentals, so be sure to check local laws before purchasing a home you plan to rent.

Con: It’s harder to maintain a property that isn’t close by.

When scouting for a second home, pay special attention to how much work is required to update and maintain the home. A home that requires extra attention will cost you not only money but time. Buying a home that is cared for by a homeowner’s association can relieve the stress of regular maintenance and upkeep.

Location is especially important when buying your second home first. Buying too far away from your weekday home can make loading up the car, fighting traffic, and wrestling kids just for a 24-hour getaway seem more like a burden than a vacation, as Bart Higgins commented in CNN’s article on the topic. Although rates of appreciation for vacation homes have grown between 2013 and 2017, choosing an area with consistently high resale value is a must.

If you’re a renter who is ready to purchase but delayed by educational debt or priced out because you live and work in an area with higher home prices, you might consider taking this alternative approach. If renting your first home and buying your second home first means you own property that’s building equity, providing you with a space to relax, and some extra cash – maybe it’s not such a crazy idea?


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