In India, several people buy a second home mainly for investment purposes. While it can be a good investment, you must consider certain things before investing your hard-earned money. Read on to know more.
If you are planning to buy a second home, you are not alone. Today, a large percentage of the Indian population owns more than one home. A second home serves multiple purposes, it can be used as a vacation home, a retirement abode, or as an investment to earn valuable income through rent. Research suggests that the second home market in India is growing at about 12% every year, and second homes accounts for about 5% to 8% of the total real estate transactions in India.
But, whether you wish to buy a second home for investment purposes or retirement, you must be careful about the purchase, especially if you wish to home loan online apply. Here are a few critical factors you must consider.
Where is the property located, and how big is it?
The location and the size of the home are two crucial factors that you must consider when you buy a home. If you are buying the second home to generate income, you must carefully consider the location of the property and determine if you would easily get a tenant and whether you will receive a decent sum as rent.
It would help if you also considered the maintenance cost of the second home as it will be an added expense. The maintenance cost depends on the size of the house, whether you own a single storied home or a multi-storied apartment.
Assess your short-term and long-term financial condition
A lot of home buyers fund their purchase by paying the minimal down payment and apply for a home for the remaining amount. Generally, most lenders require the borrowers to pay at least 20% of the property’s value as a down payment. But, depending on your current and future financial condition, you can consider paying a higher down payment. Remember, the larger the down payment, the lesser the amount borrowed.
Consider the additional expenses
When you calculate the cost of buying a second home, apart from the actual value of the property, you must also consider the other expenses like insurance and maintenance. Today, most lenders require the loan borrowers to purchase insurance before approving the loan. Also, insurance is an excellent way to get financial security against unforeseen risks.Read more: Why it is safe to choose the uber stock than the other?
Maintenance is a recurring expense you must pay for as long as you own the home. So, it is advisable to set aside at least 2% of the property’s value per year for maintenance, repairs and upkeep.
Look for ways to earn income from your second home
Buying a second home and renting it out is the most popular way to generate a steady source of income. But, there are other ways to earn from your second home. You can consider leasing it out to corporate companies. A lot of companies look for homes to accommodate their employees. This can help you earn a valuable income (often the rent paid by the companies is more than the rent paid by the individuals).Read more: Why is everyone giving first preference to nyse wfc stock?
Another way to generate income is to rent the home to tourists. If your home has excellent amenities and is in a good location, you can expect regular books and a decent income.
Thus, buying a second home requires careful planning. Make sure that you assess your needs and financial condition well before making a decision.