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Considering Buying 2nd home before primary home

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doomsmith
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Considering Buying 2nd home before primary home  Reply with quote  

Hi there -

My wife and I live in Louisville, KY - and the market here is super hot for properties, to the degree that most homes are priced around $20-40k more than the neighborhood value. With small inventory and high demand, you get a market like this. Neither of us are comfortable with buying in this market with a bit of uncertainty in on the job front in my industry - I'm doing fine now, but if (*knock on wood*) I had to seek other employment, I'd most likely have to relocate. Seeing as how we feel a market correction is due in the next 2-4 years, we figured it best to wait on our $280k purchase in Louisville and focus on a beachfront or beach community condo in a safe community on the east coast or Gulf that we could use as a rental investment when we're not in it - with the purpose of having it paid off as our future retirement home when the time comes. I was thinking a 2BR 1.5BA condo around $150k and getting as close to break even annually as possible on it through a rental agency. My gut tells me that Hilton Head Island is the best spot for us, but we haven't visited many beach spots outside of Central and southern Florida. We're seeking an area with low crime and with enough amenities that we wouldn't get bored if we wanted to do something other than relax by the water. We're pretty laid back and not very party oriented. Ease of access from Louisville is also a consideration, either by car or plane.
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What are the pros and cons of purchasing a "second" home before your primary one? We wouldn't be able to live there more than 50% of the time to qualify it as our primary residence.
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Post Wed Nov 22, 2017 7:36 am
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oldguy
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quote:
We wouldn't be able to live there more than 50% of the time to qualify it as our primary residence.


If your "second home" is your ONLY house, then it is not a second home - and you don't have to meet a 50% primary rule.
But it is a bad idea - with my rental houses, I keep them rented full time - I get the tax breaks for expenses and I get a 1099 for my income. You can rent a house weekly in a tourist area with a property manager - but that means that the house will be furnished, it will be cleaned after each tenant, fresh sheets/towels, etc, just like a motel. You will be able to schedule your vacations in your house with your PM. But the cost is the same for you as for other tenants (in the form of lost income from others while you are there) and the cost of the cleaning crew, sheets, towels, is the same for you. BTW, the depreciation accounting between you/tenants is a paper nightmare. IMO, you'll do better by renting a motel for your vacations - and renting out your house by the year (unfurnished).

If you want to invest in real estate, there in nothing wrong with living in an apt and owning 2 or 3 rental houses. Just don't mix vacations and investing.
Post Fri Dec 01, 2017 5:39 pm
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