Buying a second property is a big step. Although it is never possible to know with certainty that the risk will lead to reward, two situations that increase the odds of success include the following.
#1: The property is in line with future goals
It is important to note that a typical home or condominium is just one option when considering a vacation property. There are many different types of real estate available, and something other than a traditional home may be a better fit for your future goals.
Instead of a pre-existing structure you may want to purchase undeveloped land and build your own home. This can better ensure you get a property that meets your needs. This can be done through a developer that is building a community or on an open lot in almost any location — though you will want to do your due diligence and make sure the local zoning rules and regulations are in line with your plans for the property.
Another option is commercial real estate. Perhaps after reviewing your financial plans for the future, you decide that you want something that will bring in income or want to pursue your dream of opening a restaurant or shop. This could be the opportunity take that step.
Whether looking for a dream home to relax or a commercial space within a bustling downtown, it is much more likely the purchase is a good bet when the property is in line with your goals.
#2: The real estate fits your financial plans
Take time to review your financial affairs before moving forward with a real estate transaction. These purchases are the biggest we make in our lives and, when done wisely, they can help to diversify our portfolio and solidify our finances. However, a purchase that goes array can prove financially disastrous. Thinking about buying a vacation property is an opportunity to get your finances in order and review your planning strategy.
When looking at the financial impact that comes with purchasing a property, the review should include more than just current assets and debts. Also include a budget for the purchase as well as potential maintenance costs and any HOA or other property fees. It may be wise to check in with a tax professional as well, as applicable taxes can lead to additional paperwork. For some this could mean more in taxes, for others it can offer lucrative tax benefits.