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

RealtyTrac reports that February is one of the best times to buy a home, and with mortgage rates continuing to inch up, the perfect time to invest in a second home as a source of rental income could be right now. 

But 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. 

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.

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. 

Renting out a second home teeters on the line of mortgage fraud or not, so it is important to understand the difference between an investment property and a second home that you rent out.