Have you been thinking about buying a second home or investment property?

The realtors at The HIVE have experience helping people buy primary residences, second homes, and investment properties. We put together this quick read to help you learn about your next potential real estate purchase. Read our blog for more information about second homes and investment properties.

If you have additional questions, or are reading to find your perfect second home, contact us today.

1. Primary Residence vs. Second Home

What is the difference between a primary residence and a second home? Buying a second home is very similar to buying a primary residence, although there a few key aspects to consider:

  • A second home is defined as a residential property that the owner did not purchase for use as an investment property. The owner resides in the home for at least part of the year but does not use as the primary residence. 
  • Many lenders require buyers to put down a minimum downpayment of 10% (compared to a potential 3% downpayment for a conventional loan on a primary residence).
  • Buyers will likely pay a slightly higher interest rate for second homes than primary residences.

Buying a second home is slightly more complicated than buying your primary residence . If you are looking to get a mortgage for your second home, you will likely need a larger down payment and have to pay a higher interest rate. It’s important to discuss with a lender before touring homes to verify what types of homes will be a good financial fit for you, your family, and your goals.

2. Second Home vs. Investment Property

Sometimes the terms "second home" and "investment property" are used interchangeably, however there are a few distinct differences.

  • An investment property is purchased for the primary purpose of generating income, while a second home is not. 
  • Second home loans are typically easier to qualify for than investment properties.
  • Second home loans typically receive lower interest rates than investment properties.
  • Investment Properties are able to depreciate even while they're appreciating in value:
    • Appreciation is when the value of the property increases over time.
    • Depreciation allows investors to recoup some of the costs of managing an investment property by claiming a tax deduction. Tax depreciation is a theoretical loss in value over time as a result of typical wear and tear. 
    • Taxes are difficult, so always consult a tax professional.

3. Renting Out Your Second Home

While owning a rental property can take a large initial investment, each time your property is rented out, you earn income that you may use to improve your property or help pay the mortgage. If you’re only planning to occupy your second home for a couple of weekends each month, it may be a great idea to set it up to rent out a week or two. Visit our investment property blog to learn more about the benefits. 

For tax purposes, a property is a second home if the owner lives in it for at least 14 days each year or 10% of the number of days it is rented out.

Typically, if the second home is rented out for less than two weeks per year, the owner can keep the rental income without paying taxes on it.

4. Why are People Buying Second Homes?

According to the National Alliance of Home Builders, the U.S. has a stock of 7.5 millions second homes as of 2018, reports predict that this number increased dramatically in the last two years due to the increase in availability (and sometimes necessity!) to work from home. Reason people are buying second homes include but are not limited to:

  • Looking for a getaway from the city
  • Looking for a place for the future
  • Vacation Retreat
  • Family Retreat
  • Investment Property
  • Retirement
  • Being closer to friends and family

5. Things to Consider When Owning Two Homes

While it may seem pretty straight forward, it's important to consider the costs associated with owning two homes. Once you've purchased a second home, you'll be responsible for the following on both homes:

  • Property taxes
  • Insurance
  • Furniture
  • Utilities
  • Possible HOA fees
  • Security
  • Maintenance

6. Kiddie Condo Loans

The name is slightly misleading, because "Kiddie Condo Loans" can actually apply to several types of residential real estate. So what do we mean when we say "Kiddie Condo Loan"??

A kiddie condo loan is an easier way for parents to purchase investment property, rent to their children or family members at market rate, and build equity. 

  • These types of investment loans are administered by the Federal Housing Administration - Both the parents and the child or family member who will live in the home are on the loan.
  • It's a great way for parents to help their children get into their first home.
  • It's an alternative to renting an apartment or dorm in college
  • It's an alternative to renting for seniors who need to be closer to family for help as they age. 
  • Easier qualifying standards than a typical investment property. 


Let us know if you have any questions about buying a second home.

One of our experienced realtors will be in touch as soon as possible. 

We can start the process today!