Owning more than one home is a good financial strategy to have and a great long-term plan towards retirement. When the chance arises, a lot of people prefer to invest in a second home. While the use might not be immediately apparent, it is actually more useful than it seems at first glance.
Second homes are great as an additional lifestyle option, but they can be even much more than that. Here are some of the best ways to make the most of a second home:
There are many financial instruments available to invest in such as fixed deposits, mutual funds or even precious metals like gold. However, a second home is a good investment to have. Market metrics indicate that real estate investments are one of the best performing asset classes with higher returns on investments than almost all the previously mentioned assets.
A second home is a great way to get tax benefits on the interest payments on your mortgage. There are also other deductions that you can claim even when you are making income from the home.
You can make your second home your retirement villa. If you live in the city, you can buy a home in a quiet countryside of your choosing where you can either live when you have retired or also rent out part of it as an income property. When retirement comes, there’s a good feeling that comes with being able to make the choice to leave the city and relax in a quiet country while maintaining a similar standard of living.
Your second home can serve as a rental property that will be generating income for you. With the help of reliable property management company, such as Lokahi Properties, you can turn over your second home to be rented out to tenants. The income can even be enough to pay part of the mortgage for your first house.
Buying a second home in a coastal area can give you a vacation spot where you can take your family for holidays. In most areas, you can also rent it out by using a property management company, such as Lokahi Properties, to find short stay tenants. This will help cover most of your maintenance expenses and even some mortgage costs during peak tourist seasons.
Having a second home does not have to be a luxury. With efficient property management, you can turn it to an income generator that will help you meet your financial goals. If you are considering getting a second home, be rest assured that there are many ways that it would benefit you both financially and non-financially.
Have you ever thought of owning a second home? Or maybe you have one but because of your schedules, they do not permit you to spend more time in it than you’d love? Guess what? Your options are limitless especially when the property is located in the island of Hawaii. Hawaii is known for its rocky landscapes of cliffs, waterfalls, tropical foliage, and beaches with gold, black and even green sands.
We are blessed with diverse natural scenery, abundance of public beaches, oceanic surroundings, warm tropical climate as well active volcanoes. These attributes have all contributed immensely to make this island a popular destination for tourists, surfers, volcanologists, and environmentalists. Among other things, a lot of Hawaii’s rich cultural diversity, as well as the exotic location, have made this island what is today. Hawaii is a huge investment hot spot for not only businesses but most important investment in real estate.
We spend so much of our lives working. It is important to think about what tomorrow holds for you and your families. This thought may be supported by the desire to buy a home in a quiet and pristine location, which is calm, peaceful, has friendly local, and has a safe environment. There isn’t any place better to buy a second home than in the island state of Hawaii.
Owing a second home is regarded by many as extravagant, especially when viewed from a neutral standpoint. Critics may oppose a second home, as it may stay unoccupied year upon year. What they fail to understand is that having an unoccupied second home in an island is like discovering a gold mine. You can generate thousands to even a hundred thousand dollars in rent profits per year, depending on the house.
Here are some of the benefits of renting out your second home.
Getting A Shot At Real Estate Investment Firsthand
There aren’t many better ways out there to get a shot at what investment in real estate really is, but you can get a taste of it by renting out your second home.
Cash Flow Generation
An extra few hundred or thousand dollars a month generated by your second home really comes in handy during these uncertain economic times.
Who Doesn’t Need a Security Blanket
Aside from cash flow, the property will go up in value, giving you an investment to fall back on if ever needed.
Buy More Properties
Considering the finances the second home generates on rents, it may help you with the funds to buy a third home to be leased out as well. This leads to more financial security.
There are Tax Benefits For Being A Landlord
here are some great tax benefits to owning rental property. The cost of repairs to the rental property (provided the repairs are ordinary, necessary, and reasonable in amount) are fully deductible in the year in which they are incurred. Good examples of deductible repairs include repainting, fixing gutters or floors, fixing leaks, plastering, and replacing broken windows. The insurance premiums you pay can be deducted for almost any insurance for your rental activity. They may include fire, theft, flood, and the mandated hurricane insurance for the rental property, not forgetting the landlord liability insurance. Finally, you can deduct fees that you pay to attorneys, accountants, property management companies, real estate investment advisors, and other professionals. You can deduct these fees as operating expenses as long as the fees are paid for work related to your rental activity.
Conclusively, considering the fact that selling your second home or renting it out are both profitable, know that their levels of profitability differ immensely. What this means is that if you are seeking a short-term investment, then selling your second home is definitely the best option. However, if you intend to be in it for the long term, then listing it out as a rental can be quite profitable, and as you are earning the rental income, your house will be increasing in value over time, maximizing your investment.
Why let your money stay idle in the bank when you can grow it big time with Real Estate Investment?!?
If you have been working for some time, you probably have accumulated some form of savings, and the first mistake we don’t want to make is to let the money stay idle. There are many ways to work your money hard, and one highly recommended approach is through real estate investment. Here is why:
1. If you choose the right property, it can appreciate in value over a shorter period of time, hence providing good profits when rented out or re-sold.
2. Real estate plays a critical role in advancing towards financial freedom, especially for those with the passive and recurring income through rentals.
3. Real Estate has less volatility as compared to stocks and shares, hence lower risk.
4. In Kona, both the long term rental market and vacation rental market are profitable. There is a need for long term housing, and if you have a long term rental available, it is easy to get quality tenants in your home so you can enjoy passive income each month. The vacation rental market is also lucrative, as Kona is a premium tourist destination.
It is all about the 3 Fs: finding the right property, funding that property, and farming that property (making profits).
Given the thousands of properties available in the market, we want to choose the right property, so that the value can go up, and it can be easily rented out and resold when desired at a good price.
To choose the right properties, we consider the following critical factors:
In real estate, size matters! This is the first impression when a potential tenant or buyer steps into your house. Besides considering space for the living rooms and bedrooms, extra spaces like garages, lanais, backyards, storage, and car spaces are important.
3. Swimming pool
In Hawaii, a swimming pool is a huge draw. If you want to rent your property (and particularly if you want to vacation rental it), I would highly recommend a home with a pool.
4. Age of the property
This is important in determining its value. Older houses have much different styles from modern houses, and this can be both a pro and a con. It is a pro in the sense that if your house preserves some nice traditional architectural designs, and that is highly loved by the prospective client, you could take the opportunity to increase the selling price, hence making better profits. It is a con in the sense that if the client prefers houses with more contemporary designs, this could have a dire impact on your older property given that it is harder to sell or rent. In Hawaii, if the house is older, there is a higher chance it has termite damage.
Price is definitely in the consideration, hence it is essential to do a market research in the neighborhood for similar properties you are looking for before jumping to a decision. Also, if you intend to take on financing, you should check on the availability of loans and interest rates to ensure you can afford it and qualify for it.
6. Condition of the property Arguably, this is one of the most important attributes to look out for in a property. You may have found the best location, the biggest size at the most bargain-able price, but if the condition is inhabitable, what does it make of your newly bought property? Nothing !! Hence, it is crucial to observe the condition of every potential property and take into account the potential repair fees required for that property. Factor this into the overall pricing of the property to see if it is still worthwhile to buy that property.
To conclude, I have shared with you some valuable insights about to why you should adopt real estate investment as one of the very feasible methods to grow your money and create a steady passive income to achieve your long term financial freedom goal and also essential tips for choosing a property to fulfill that aim.
Contact us at Lokahi Properties today. We specialize in both long term and vacation rentals and know what it takes to have a successful rental property!
Dana Kern is the Principal Broker at Lokahi Properties