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February 2024

El coste real de una segunda vivienda

It’s a well-known fact that real estate tends to appreciate over time, so it comes as no surprise that second home ownership is an extremely popular aspiration for many. In fact, according to data from the most recent National Association of Home Builders study, there are around 7.5 million second homes in the United States, proving just how desirable second home ownership is.

It’s a well-known fact that real estate tends to appreciate over time, so it comes as no surprise that second home ownership is an extremely popular aspiration for many. In fact, according to data from the most recent National Association of Home Builders study, there are around 7.5 million second homes in the United States, proving just how desirable second home ownership is.

Enabling you to make a long-term investment and benefit from having your own vacation property, a second home brings significant benefits. But before you take the plunge and buy, it’s wise to consider both the ongoing and hidden costs, so you’re fully prepared from a financial aspect.

Cost of Owning a Second Home

The purchase price is just the tip of the iceberg

The hidden cost of owning a second home can often catch buyers off guard. Of course, there’s the expected, like the purchase price or deposit if you have a mortgage, but there are many other costs that need to be factored in too.

We’re exploring the expenses that come with the territory, shedding light on the true cost of owning a second home, and looking at the importance of careful budgeting.

Breaking down the cost of owning a second home

Mortgage payments

The most obvious expense associated with owning a second home is the mortgage payment. Just like a primary residence, buyers often secure a mortgage to finance the purchase. Interest rates, loan terms, and the down payment can significantly impact monthly payments, so it's crucial to factor this cost into your budget and ensure it aligns with your financial capabilities.

Property taxes

Property taxes are another substantial consideration. They vary widely depending on the location and value of the home. Plus, some areas have higher property tax rates for non-resident owners. It’s therefore essential to research and calculate these costs accurately before you buy.

Utilities

Utility expenses can accumulate quickly in a second home. From electricity and water to gas and internet services, these ongoing costs are often overlooked, but can significantly impact your budget. Standing charges or fixed fees mean that you have to pay for some of these utility services whether you’re there or not, so take the time to work out the cost in addition to the outgoings of your primary home.

Council rates

In some areas, property owners are required to pay council rates, which fund local services and infrastructure such as garbage disposal and the upkeep of roads and public spaces. These rates can vary widely, so it's worth checking the specific requirements for your second home location.

Home insurance

Insuring your second home is non-negotiable. Comprehensive cover will protect your investment from accidents and unforeseen natural disasters such as wildfires, floods, and hurricanes. But bear in mind that insurance premiums can vary widely depending on the location, type of property, and coverage selected. For example, if you need rental insurance as well as standard home and contents cover.

Maintenance

Budgeting for routine maintenance is essential to prevent small issues from escalating into costly problems. Regular upkeep includes everything from landscaping to pool maintenance, and gutter cleaning to snow removal, and is crucial to preserve the value and functionality of your second home.

The rule of thumb is that property maintenance generally costs 1% of the value of your property per year, so a $1 million home would require $10k worth of maintenance each year.

Furnishings

Fitting out a home with furniture, linens, and appliances is a pretty hefty upfront cost, especially if you’re furnishing an entire property from scratch. According to FURNISHD, the average cost to furnish a $1 million property with 3 bedrooms and 1 living room is $35k, but this rises to $60k for a $1.5 – $2 million property, and even $150k for a $3 million home.

Cleaning services

As a second home owner, you may not always have the time to clean the property yourself, and equally, if you rent out your vacation home to other holidaymakers, it needs to be cleaned to a professional standard.

If this is the case, cleaning services will need to be factored into your budget, allowing for regular or post-visit cleans.

Complex community fee

If your vacation home is in a complex, you may be asked to pay a complex community fee which funds the amenities and upkeep of the grounds. Compared to a stand-alone property, this is an added expense that needs some thought.

Agent fees

If you decide to sell your second home, agent fees will come into play. These fees typically range from 5% to 6% of the sale price. And while selling a property isn't a regular occurrence, it's essential to consider this cost when assessing the overall financial commitment.

In the same way, if you opt to rent out your property through a rental agent, you can expect to pay rental management fees ranging from 10% to 50% of the gross rental income.

Budgeting before buying

Careful budgeting will help you to stay on top of the myriad of expenses associated with owning a second home. Here are our 4 top tips to help you make an informed financial decision before you buy.

  1. Create a detailed budget: Outline all potential costs associated with owning a second home, including mortgage payments, property taxes, utilities, furnishings, maintenance, home insurance, council rates, cleaning services, complex community fees, and potential agent fees.
  2. Emergency fund: Setting up an emergency fund specifically for your second home can provide a financial cushion for unexpected expenses. Whether it's an unexpected breakdown or an unforeseen spike in property taxes, having a buffer can prevent financial strain.
  3. Research local costs: Different regions have varying costs of living, property taxes, and utility rates. Before purchasing a second home, thoroughly research the specific area to gain a clear understanding of the ongoing expenses you'll encounter.
  4. Consider rental income: If you plan to rent out your vacation home when you're not using it, factor potential rental income into your budget. This can offset some of the ongoing costs of owning a second home.

Enjoy your investment

Owning a second home can be a very rewarding experience, especially if you’re fully prepared for every associated cost.

If second home ownership interests you, but you’re wary of hidden costs, vacation home co-ownership through Kocomo’s providers will give you complete peace of mind that your investment stays within budget. Providing full transparency of costs and support with your purchase, ongoing co-ownership, and sale, this is the smart way to own.

Discover the world’s leading Vacation Home Co-ownership Providers at Kocomo.com.

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