Buying a second home is seen as a good investment by many. Here are some pros and cons of having a second home:
- Cash reserve: Buying a second home favours those who are high on cash reserve. It is not wise to take a loan for a second home as it defeats the very purpose of buying due to the high interest rates.
- Secondary income: If the first point is sorted out, then a second home can serve as a secondary source of income by way of rents. This is preferred by many high-income and NRI groups who invest in many properties and earn an extra cushion of income from these.
- A vacation home: Again, a home/villa/row house situated in the outskirts of a city or in a hill-station amidst lush greenery serves as a base point for a quiet getaway. With some good networking, the house can be rented out for some parts of the year too for people looking for a home-stay.
- Tax benefits: A second home is seen as a way of saving on taxes. Although only the interest is eligible for deduction on a second home, as per this article, there is no limit on the deduction for interest payment.
- Fluctuating market conditions: It is believed that there is a huge bubble surrounding the real-estate market. The conditions are volatile at the moment and although one sees a constant rise in the prices, one cannot predict its sustainability. It’s therefore risky to invest huge sums.
- Higher maintenance: A property involves regular investment for repairs and maintenance. Even if the property is rented out, periodic checks on the wear and tear and upgradation of fixtures is recommended for long-term durability. This can be draining on the reserves.
- Managing tenants: Getting good tenants for your home can be tricky. Especially, if the property is in a different city from where you reside, it can become inconvenient to keep checks and supervise the condition of the property.
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