With property prices dropping steadily, you might have considered buying a second home in Brampton as an investment. While it’s an excellent idea, it’s different from buying your first home. From taxes to finding the right tenant, there are several things you need to know first. Brampton has a mix of properties from affordable to high end, which helps with the house hunting process. Also, with available rentals at an all-time low, finding a tenant would be easy.
5 considerations before buying a second home in Brampton:
1. Understanding the full financial responsibility
When owning two homes, you’ll have the financial responsibilities double up. You’ll not only need twice the amount for mortgage payments, utilities, and condo fees (if any), but also for emergencies and general maintenance.
Write out a detailed budget including home insurance, travel costs, and any upgrades your second home needs. You’ll need a 20% down payment, which you might pull out of your savings. Make sure all your big money issues are solved before that. Do you have savings for your retirement? Do you have a fund set up for your kids’ college? Do you have any credit card debt?
2. Finding the right second mortgage for you
If you’re still paying the mortgage for your first home but want to buy a second home in Brampton, you can still qualify for a mortgage. Here are some of your options:
- Second home mortgage
- Home equity loan on your current home
- Home equity line of credit (HELOC) on your current home
- Cash-out refinance from your current home
The lender will evaluate your credit report, current income, employment history, and assets.
3. Renting out your second home in Brampton
Renting out your second home in Brampton is a smart move to subsidise your monthly mortgage payments. If you’re buying a house with a walkout legal basement, you can rent it out separately. Before renting out, fix all the issues, replace appliances if needed, and give tenants all the facilities you need. Only then, you’ll find good tenants who’ll enjoy living there and taking care of your property.
4. Paying taxes on rental income
Since you’ll be making income from your second home as a rental property, you’ll have to mention it when filing taxes. You can do certain costs including maintenance, snow removal, appliance costs, lawn mowing, and repairs under expenses. Work with an account who has experience dealing with clients with rental properties.
5. Partnering up with someone for fractional ownership
I’ve seen this arrangement multiple times and it works. Partner up with a friend or family member to purchase the property in Brampton together. Split it equally or a percentage that you’re comfortable managing. You need to understand what your long term goals and expectations are. Most people purchase homes with a long term plan of generating income and selling it 10-15 years down the line. However, few purchase a second home, update the appliances and electrical work, redo the interiors, and fix anything that’s broken. And then sell it for a much bigger amount. Try finding what works best for you.
Hi! I am Catherine Nacar, a real estate agent based in Brampton and I’m here to help you buy your second home. Give me a call at + 1 (905) 867-4828 or email at firstname.lastname@example.org today.