By Salvatore Presti

So, you’ve spent decades building up a nest egg to help provide you with a financially stable and comfortable retirement. The unpredictability and risks involved in many kinds of financial investment so you prefer not to base your entire portfolio on the markets. You want something more tangible, with the possibility of steady growth, and that you can leave to your family when you pass away.

If this describes your approach, then investing in a second home makes perfect financial sense.  Property values tend to increase over the long term, so your capital is growing, despite any shocks the financial markets might experience.  Not only that, you’ll have the option of generating rental income as an additional rental stream.  And, if you choose, you can use your second property as a vacation home for yourself and your family, thereby avoiding the costs typically associated with leisure travel, hotels, etc.

Before you proceed, it’s important to be clear about your principal aim in buying a second home.  Financial growth as part of your portfolio?   Opportunity to enjoy a change of scenery? A place where the family can vacation together?

Types of property

First of all, consult an investment /tax advisor to help you understand the financial implications of second home ownership: not only in terms of your initial purchase, but also whether there are tax advantages due to the ongoing costs, and the eventual sale.

If you decide that second homeownership is definitely for you, the next step is to consider the type of property that best suits your needs, and why.

Let’s consider the options, and the pros and cons of each.

Condominiums

Condos have several advantages. They’re more secure than an individual property, maintenance is easier to arrange, and there’s no upkeep of external areas involved.  You’ll be able to show up, move in and enjoy your home, and then lock up and leave without much effort. That’s great if you want a vacation home for yourself and your family.

However, there are also some disadvantages if you want to generate an income. Many management associations have the right to approve or reject potential tenants, so letting may not be so easy and your property may sit empty at times.  There are likely to be many restrictions in the lease – in terms of noise, use of public areas, etc.  These clauses may make it more difficult to use the property for lucrative short-term or Airbnb -style, without violating the terms of your lease.

Individual properties

With an individual property, you’ll have more freedom to rent it out (subject to city regulations), whether on a long- or short-term basis. Whichever type of tenancy you go for, unless you’re living close by and want to be heavily involved with the day-to-day issues as they arise, you’ll likely need to pay for a property management company.  They’ll liaise with your visitors for you, and handle the headaches associated with maintenance and repairs (at a cost of course). This will increase your expenses considerably. Continue Reading…