6 Thought Processes Before Purchasing A Second Investment Home in Greater Boston

Considering that home prices are still quite low in the Greater Boston Area (when compared to a few years back), now might be a good time to purchase a second house as an investment. But buying a second house will significant money, so think before you start the process.

Before Starting the Process of Purchasing a Second House as an Investment

  1. Think Logically – Review Finances: Knowledge is power, so make a comprehensive review of your finances, find out how much you spend of what you earn and add in all of your current liabilities to find out how much you truly save at the end of the month. Once this is done, you should have a clear picture of your finances, know if you truly can afford to purchase a second house as an investment. If the answer is no, then stop right here since it makes no sense to invest in housing (part of the blame for the housing bubble burst is attributed to people purchasing second houses when they could not truly afford them).
  2. Factor in Additional Expenses: A second house is similar to your primary residence, you will, in addition to the purchase price, have to pay for insurance and taxes.
  3. Qualifying for a Second Mortgage Loan in the Greater Boston Area: Getting approved for your first mortgage loan in any part of America is a whole lot easier than for a second home, because it is considered a necessity. A second house on the other hand is considered a luxury! So lenders expect excellent credit scores, a initial down payment of around 30% of the house’s or condo’s value, and a monthly income sufficient to make all the payments. Without all of the above, the chances of the loan getting approved are low, since the risk of lending will be higher. Additionally the government has made it harder to gain acceptance for a second mortgage loan (to prevent a re-occurrence of the housing bubble burst). If you do not manage to get a mortgage loan in the Greater Boston Area, you may have to pay in hard cash!
  4. Give it a Week – Focus on Something Else: Once you have done the above, found that you have sufficient finances to make the purchase, give it a week i.e. do not rush into this process, since it involves a lot of money, it is a must for all decisions to be purely logical and not emotional. A rest period of a week will give you time to truly understand the ramifications of purchasing a second house, ensure that it was not a purchase based on “whim”.
  5. Holding Time: If after all the above, you still wish to invest in a second house, then plan on holding onto the house for quite a bit of time to recover your costs. Unlike times of yore where housing costs were increasing at an exponential rate, today the rate of increase is slow. While prices will increase, it will take time. So make sure to understand; a second house is a long term investment! Being jumpy or skittish will waste the investment.
  6. Consider Renting it Out: Since it will take time for your investment value to appreciate, consider renting out your house in the Greater Boston Area. While income from renting is taxable, you will still earn a little from it every month, this can be used to supplement your income, until you are in a position to profitably sell the house.

Purchasing a second house as an investment is no small decision. It will involve a lot of effort, time and money. So make sure to take the time and make a methodical decision.

Phil Ganz (354 Posts)

Philip D. Ganz is a Boston Mortgage Broker and Boston Home Loan specialist. For information, expertise, consulting, or advice about home loans, refinancing mortgages, or commercial property loans, contact Phil with no obligation: 617-529-9317

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