Investing in a Second Property

Is investing in a second property the best decision for you? If you've found yourself with a little bit of extra liquidity, you might be considering investing in additional property, a startup company, or adding to your general investment fund. What makes a second home or property a good move for your future?

Family Memories

If you have the opportunity to purchase a second home, consider a vacation house for your family. Do you have a favorite family vacation spot that you visit every year? Buying a second home in this area instead of renting a house or cabin every year for the next 20 years is an investment in a second home that starts earning equity from your vacations. Establish a place for your family to make countless memories together. If you vacation with your extended family, consider co-investing with your family members to get more use out of the space. You can take turns using the house and have a wonderful place to gather everyone together for holidays and special events. If you decide to invest with other people, make sure you designate how the property will transfer to your heirs and consider establishing an LLC that oversees the transfer of property. If you purchase the home yourself, you can rent the space to your relatives for their vacations, or (bonus!) turn it into a vacation rental during the time you aren't able to use it. See more ideas for cash flow returns on a second property investment below.

Income Opportunities

If you don't see yourself establishing a vacation home, but you think you want to use your funds to invest in another property think about the different opportunities to create an income property for yourself. Purchasing a rental home or multi-family building can be a significant cash flow option if you're able to manage the ongoing mortgage commitment, tax responsibilities, and upkeep. Find a property that you can successfully manage and start reaping the benefits of your new investment. Your investment property can continue to serve you for years and may even be the right solution for your retirement plan when you go to resell it.

Things to Consider

There are a few aspects of your current situation you should review before committing to your second property. Will your financial situation remain stable for the foreseeable future? Will you be able to continue managing payments and upkeep if your job changes or if you don't live in the area of your investment? Is the property in an area that vacationers or renters find desirable? Will you be able to maximize cash flow if or when you aren't using the property? If you determine the answer is yes to these questions, then investing in a second property might be just the next move for your portfolio. 

Before you invest, speak with your trusted real estate professional to make a plan for securing the best investment for your life and future.