What You Need to Know About Purchasing a Second Home in Phoenix

Have you always dreamt of a second home — a warm weather getaway that’s more than just a holiday? That dream is becoming a reality for more and more American retirees, with six percent of them splitting their time between two residences, and that number is growing.

While some people are happy to rent a second home, the benefits of buying are winning over many retirees. For starters, the market is at a sweet spot for potential buyers. In fact, Phoenix was named the top residential market of 2017!

Things are looking bright for Phoenix’s market into the future, too, but interest rates are likely to rise from here, making now the time to buy. If you want to buy a second home where the weather’s hot year-round, it’s a good idea to do it while the market’s hot, too.

Here are some things you should think about before purchasing a second home.

Get to Know Your Future Home

Maybe you’ve had a couple great visits to Phoenix to see a friend or vacation with your family, but before you make the leap and buy a house, you should really get to know the area. Whether it’s exploring the local restaurants or hiking the surrounding area, it’s worth taking the time to acquaint yourself with your potential second hometown. Wine and dine the area before you make it your home.

Take the time to research the property you’re interested in, too. While many retirees opt for detached houses, more people are starting to choose condos because of the built-in amenities and the ease of maintenance, which is covered by a homeowner’s association. A second home is easier to maintain when you only have to worry about the interior — no lawn to keep groomed or exterior to repaint regularly. When you’re hoping to use your second home as a getaway, choosing a low-maintenance dwelling can be key.

Money Matters

From the down payment to taxes and utilities, home ownership costs add up fast. This probably isn’t news to you since you’ve gone through the process at least once before, but juggling two homes has additional costs — and benefits, too.

To begin, break down your income and anticipated costs to make sure you can comfortably afford a second home in the first place.

A Hefty Down Payment

Right off the bat, you’ll probably need a larger down payment than you would with your primary residence. Typically, a second home requires at least a 10 percent down payment, although you’ll need 20 percent or more of the total cost if you wish to avoid purchasing private mortgage insurance (PMI).

Follow the Tax Rules

When you own two homes, there are different tax rules, too. It can get complicated, but there are some tax breaks worth taking advantage of. It’s worth looking into the nitty gritty of tax rules for second homes and speaking with a tax professional to ensure all your bases are covered.

When you purchase a second home, the mortgage interest and property taxes are deductible just like your primary home, provided you aren’t renting the house out for income. The mortgage interest is deductible on up to $1.1 million in total debt between two homes, but you can deduct property taxes paid on however many properties you own.

Buying With Friends (or Family)

If the finances of buying a second home don’t seem manageable alone, it might be worth considering buying with a friend or family member. Not only could this cut the upfront costs, it alleviate the burden of maintenance costs all year long.

That said, it’s also important to ensure you have a solid, legal plan between any co-owners to ensure everyone’s rights and obligations are upheld and protected. This option could leave you more vulnerable if you or your partner or partners decide to sell their share down the road, leading to financial or personal conflict. But with the right planning and communication, it could be just the key to acquiring a second home at a reasonable cost.

Managing Your Property From Afar

Presumably you’ll be spending some of the year at your first home, and during that time you’ll need to ensure your second home is cared for. Unless you have a close friend or someone you trust living nearby, chances are your best bet for keeping a single-family home safe will be to hire a property manager in the Phoenix area.

If you choose a condo, meanwhile, the homeowners’ association may provide security, and your residence may be inaccessible from the street. Hiring a maintenance company would likely not be necessary.

Plan Your Escape

Realistically, there will come a time when you no longer want to be managing two homes. At this point, you can look forward to reaping the rewards of your investment property. First, this means you have to buy smart so that your second home is indeed an investment in the long run.

Fortunately, the Phoenix market is looking like it will keep rising, but experts anticipate it will be at stable rate. This means it’s the perfect time to invest and chances are by the time you’re ready to sell, your second home will have increased in value and your investment will pay off.

If you find yourself unable to manage two houses down the road, you may find yourself choosing to live fulltime in the second home. Phoenix is a fantastic place to retire. If you’ve chosen a low-maintenance option in a location you love, it may be the smartest place to settle.