Buying a Second Home for Rental Income: 5 Things to Consider

Buying a second home for investment is a big financial decision that can be intimidating without the proper knowledge. To better prepare you to take the plunge in purchasing a rental property, I have put together some key factors to consider. 

According to an article from Rocket Mortgage, for an investment property to be considered a success or a good financial investment, the monthly income should be equal to or more than 1% of the home's sales price.  

Can you afford a second mortgage payment?

On top of the mortgage payment, it is also important to make sure that you can afford any other debts that might come with buying a new home. 

For example, can you pay to furnish it, and does it need any repairs? You should also have some financial reserves in case the home isn't rented continuously and when it needs to be unoccupied for repairs after long-term tenants vacate. 

How to have a second home for rent without committing mortgage fraud.

A second home for rent is like a vacation home that you can rent out. 

To the IRS, it is a property rented out during the taxable year but is occupied for more than 14 days or 10% of the number of days in which the property is rented. 

What kind of investment property type are you looking for, and how do you plan on financing it?

Once you have looked at your finances and determined that you can qualify, you should look at the kind of investment property you are looking for.  

To put this in other words, you need to figure out what kind of rental property you want: long-term or short-term rentals. Long-term rental involves more of a landlord position while short-term would be more like an Airbnb. 

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