double story house with a pool

Buying a second property is a milestone worth celebrating since it represents your financial security. But earning enough income to afford two real estate doesn’t mean the process will be any easier since there are still plenty of factors to consider, maybe even more now that you’re taking in two mortgages. 

Unlike the first property, you now have to ask whether diversifying your portfolio and buying a second home is a good investment. If it won’t generate enough ROI, then it could deal a massive blow to your pockets. So even if you have a steady income and have a rudimentary knowledge of the home buying process, it’s crucial to factor in the following before diving into the real estate market again:

Factor #1: Budget

Before moving forward with your decision, always start with assessing your financial capabilities. A high-paying income shouldn’t be your only reference point since other expenses can change your ability to comfortably meet your dues — from mortgage payments, taxes, maintenance fees, insurance costs, and some much-needed leeway for emergencies too! 

After calculating all your monthly payments, including emergency funds, then it’s time to ask whether you can still afford to buy a second property. Keep in mind that deposits for second mortgages also go from 10 per cent at the least to more than 20 per cent in most cases, particularly since you’ll have to prove to the bank that you can handle two mortgages with extra funds to spare. 

Factor #2: Return on Investment (ROI)

Buying a second home with no apparent purpose can break the bank, so you also need to think about whether the new property can generate potential ROI down the line. You can ensure the second property adds to your cash flow by turning it into a vacation home or a rental property, both of which have different tax implications. 

Consulting with a financial advisor should help you determine whether renting out your second property can be a lucrative venture or not. When done right, renting your property regularly or as a vacation rental can help offset the cost of purchasing a second home. 

Factor #3: Location

Whether you plan to use the second property as a rental or vacation home, both ventures require good locations to pan out properly. Renters will always prefer excellent properties with easy access to entertainment districts, hospitals, or stores, so take your time scouring for locations that you and other potential renters will have no problem visiting. 

The Bottom Line: What You Should Know When Buying Your Second Real Estate 

Buying a second property is no easy feat, even if you do have some experience in the homebuying process. The stakes are higher and mortgage lenders will be stricter, so it helps to review different factors that will help reveal whether it’s a worthwhile investment or not. 

Buying Your Second Property? Wealthy You can Help Make It an Easier Experience

Navigating the real estate market can feel confusing whether you’re a first-time homebuyer in Sydney or not, but our full-service mortgage brokers at Wealthy You can simplify the process with our affordable loan solutions. We’re fully committed to providing options tailored to your unique financial needs, so contact us today at (02) 7900 3288 to check whether our fixed and variable rate offers suits you.