3 Things You Need to Know About Buying a Second Property in Santa Cruz

Are you considering buying a second property? It can indeed be a good move – one that can enhance your lifestyle or increase your income. But there are some things you need to be aware of so that it doesn’t become just a huge money-sink. Read on, then, to discover the 3 things you need to know about buying a second property in Santa Cruz.

1. Your Reasons for Buying a Second Property

You first need to know and get absolutely clear on your reasons for buying a second property in Santa Cruz. Your reasons for buying the property, especially your plans for its use, will determine not only the location and type of property, but also your financing options and ongoing costs as well.

Here are a few of the more common reasons people buy a second property . . . 

  • Commuter home – A second home purchased when people work far enough from their primary residence to make a daily commute impractical
  • Vacation home – A weekend getaway that buyers often plan to move into on retirement
  • Upgrade home –  Often involves buying a newer home and keeping the current one as a rental
  • Investment property – A property bought for the purposes of making money either by renting or flipping
  • Home for a family member – Typically a home purchased for aging parents or a childish

The point is that you need to think carefully about your reasons for purchasing a second property in order to purchase wisely and finance appropriately.

2. The Full Cost

You also need to know the full cost of buying a second property in Santa Cruz because it may be costlier than you think. “As a second-home owner, all the financial responsibility falls on your shoulders – twice. For example, if you have a sewer pipe problem in your main residence and then, a short time later, your HVAC system needs repair in your second home, you’ll have two whopping, back-to-back bills.:

Some of the second-property costs you’ll need to take into account are . . . 

  • Mortgage payment
  • Homeowners Insurance
  • Property taxes
  • Maintenance and repairs
  • Utilities
  • HOA fees
  • Travel costs
  • Rental-management fees

Industry pros recommend that you “write out a detailed budget, taking into account contingent expenses – for example, will flood insurance be required, and what does that cost? Are the appliances going to need to be replaced soon? Although home buyers might be able to afford these costs, keep your big-picture goals in sight.”

Be sure to consult a Santa Cruz agent to find out about the additional costs of buying a second property in your market. To learn more, just call 831-588-2334.

3. How You Will Finance the Purchase

And then, of course, there’s financing to purchase that second property. The best type of financing will depend in large part on how you plan to use the property. Lenders often have different rates and qualification requirements for second homes than for investment properties. 

Here are a few financing considerations to keep in mind . . . 

  • With a jumbo loan, for example, you’ll have to rent the second property no more than 14 days a year for your lender to consider the property a second home rather than an investment property. 
  • But if you use a conventional loan, you can rent the second property for up to six months a year and still have it classified as a second home, not an investment property. (Be aware, though, that the IRS follows its own set of rules for classification.)
  • Regardless of how you intend to use the second property, a government loan is usually not an option. In most cases, only primary residences are eligible for VA loans.

Use a Santa Cruz Agent When Buying a Second Property

Because buying a second property is more complex and can cost much more, your best bet is to work closely with an experienced Santa Cruz agent. A good local agent can help navigate the process and avoid the pitfalls while helping you find the right second property for your needs. If buying a second property in Santa Cruz is in your sights, be sure to contact us today at 831-588-2334.

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