Buying a second home could mean a total lifestyle upgrade or it could be a profitable investment property opportunity for a real estate newbie. However, like other markets that fluctuate, timing is everything when you’re purchasing a second home.
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To get your best deal, you’ll need to keep the season and property locale in mind along with mortgage calculations and the overall number of sellers in the area.
If you’re in need of home buying tips, here’s what real estate experts say you should do to ensure you get the best price on your second home.
When is the best time to buy a second home?
“The best time to buy a second home in beach areas is winter when the market and tourism is slow," Realtor and real estate radio show host Thierry Roche of Keller Williams Realty told FOX Business. "In rural areas, fall and winter are good times to buy second homes since those areas also cycle with the normal primary homeowner hot markets of spring and summer.”
He added, “In mountain-based resorts, spring and fall are the best times to buy since those are the slow times for tourism and therefore fewer buyers to compete with and more sellers need you. The only caveat would be areas that have a lot of beautiful fall foliage, then you would want to wait until after the beauty of autumn has waned, and tourism has dropped off.”
People who are looking to buy a second home in a major metro area should consider buying in between July and August or December and February because “these are the slowest times in real estate sales for these areas,” according to Roche.
Outside of the time of year, Roche said a second home purchase should be dependent on the property’s local market performance.
“For example, the Atlantic City real estate market is not doing well over the past few years due to its poor economic and job activity, therefore buyers can find a good deal due to the excess inventory on the market with many sellers chasing just a few buyers,” he explained. “However some mountainous or rural areas that are within two to three hours of major metro areas are hot right now due to coronavirus and people looking for an escape retreat and realizing that they can plenty of work done in a more remote area via telecommuting.”
Overall, the best time to buy a second home anywhere in the U.S. is when the list-to-sale ratio is in favor of a buyer’s market, which will ultimately help you obtain a good deal.
“If there are 10 sellers on the market for sale and two buyers in the market looking to buy, that is considered a market that is more favored towards the buyer, aka a ‘buyer’s market,’” Roche offered as an example.
Nathan Zeder of The Jills Zeder Group, which is affiliated with Coldwell Banker Realty in Florida, mentioned that some second-home buyers who are willing to test the waters may want to make their move when the economy is in question.
In his own words, “Historically, the secondary home market relies a lot on the economy and stock market. Buyers should look for times when there is uncertainty with both of those factors as that could create the best opportunity a buyer could have.”
Tips for buying a second home
“Second-time homebuyers should strongly consider holding off on a house purchase until they have no less than a 20 percent down payment saved," said Liam Hunt, a financial writer at CPI Inflation Calculator. "This way, homebuyers can avoid primate mortgage insurance fees, which typically cost between 0.5 and one percent of the loan amount annually.”
He also advises buyers to have extra cash in reserve when making a second home purchase because many lenders require a cash equivalent of at least two months of rent to qualify for a mortgage after factoring in the cost of the property acquisition and settlement. Investment properties may require a higher cash reserve that can be up to six months.
Additionally, Hunt said it may be worth it for second-home buyers to rent out their first home or sell it at a profit to put toward the down payment for the second home.
On a more specific note, he added, “Although both options have merit, renting out your starter home can provide a steady stream of investment income for those willing to put in the necessary maintenance to keep the rental property in a good state of repair.”