There is the comfort of having your favorite toys, books, and furniture waiting for you when you arrive, and the ease of getting away without a lot of advance planning. I merely want to address whether a second home is a good financial investment.
You can use a portion of your savings to buy a second home, or you can invest the same money in an investment property and rent your home.
If you buy, you will incur the costs of ownership and you will also benefit from any appreciation in the home’s value. If you rent, the current return from your investment will help to offset the rental cost, and you may receive capital gains from appreciation of your investment property.
The Annual Cost to Own is your net cost, after taking tax deductions into effect. Principal payments are not included in this because they are not really a cost – they are reducing your loan amount, and increasing the equity in your home.
1. You are buying in a strong market that is not overly dependent on second home buyers 2. You are buying a house with relatively low property taxes and low maintenance requirements
1. You can’t fully utilize the tax deduction 2. You don’t use the house year-round, so you only need to rent for the season