Is It a Good Idea to Buy a Second House?

While buying a second house may have benefits such as offering you a great place to อาคารพาณิชย์ ดินแดง go for vacations, and you may also earn some equity from the house with time since a house is a physical asset that would not diminish, it may not be a good financial move to buy a second home at least in some cases. Why might it not be a good move to buy a second house? Well, it is true that some wealth may accumulate from the house with time, but it is also possible that you could have earned more wealth if you invested your money in a variety of financial assets or you could alternatively buy rental properties.

The problem with many second homes just like it is with land is that they do not pay interest, net rental income as well as dividends. They in fact make you spend a lot of money for things like insurance, property taxes, maintenance and also the payment of the mortgage. All these is money being spend with no money coming in. Whether the property will increase in value as time goes by is just a speculation and therefore you cannot be sure that the house will bring profit that will help you compensate for negative cash flows that accumulate every year.

Another problem with buying a second house is the means you will be using to cover the cumulative negative cash flows just in case the house does not bring in profit as you had expected. Usually, you will take money from your financial assets such as stocks, mutual funds, bonds so as to pay the bills that come up as a result of the negative cash flows. If you were earning interest as well as dividends on those financial assets, you will be earning nothing since you will use all that money to pay the bills resulting from the negative cash flows.

If the negative cash flows continue for a long time, they will have a long-term impact since you will experience a huge loss on the interest that you should have earned on the financial assets. In the event that for a property that costs a $100,000 you spend about $10,000 every year to buy the second home, after 20 years you could be having a cumulative lost opportunity cost of approximately $500,000 on the financial assets. This will be so assuming that the value of the property increases by about 9% for two decades. Note that the interest on a house is usually about 3% for long time spans.

Therefore, if you have a plan of buying a second home with the aim of gaining wealth, it is very-true that you may be able to earn wealth from it. But it is just good to know that there are other investments out there that are much better, and you should take time to think about it if you have hope that the value of the house may go up as time goes by to enable you to get a fair return from it.