Real Estate Investments and Second Home Purchases

They always say that investing in real estate is a wise investment.  Since we don’t know who “they” are, people can be skeptic of this saying, but in the case of the current real estate market in 2015, investing in real estate is a wise investment for many reasons.

The first reason is the interest rates.  Interest rates hit the lowest they have ever been during 2013 thanks to the Fed’s bond buying program which artificially lowered housing interest rates in order to stimulate economic growth.  lot-120-maison-1Fortunately the maneuver worked, and the economy has since begun to slowly grow back towards its normal employment rates and GDP rates.  When this began to happen, interest rates went back up, but only by 1% or 1.5% depending on the month of the year of 2014 that you were looking at interest rates.  The rates out there are STILL at historic lows, so low in fact that you may want to consider using these interest rates in order to invest in a second home or a real estate investment.

The second reason it is wise to invest in real estate right now is because of the selection and pricing of homes on the market right now.  Once the economy shifted and people’s funds started to increase again from being depleted by the Recession, home prices started to rise at a rapid rate.  For 6 months out of 2014, home prices increase by many whole percentages every month.  However, home pricing is not totally back to normal in all markets.  Depending on where you are looking to possibly make a real estate investment or purchase a second home, you may still be able to get a deal on a home at a lower than normal price.  When the market fully recovers, you could see a good bit more appreciation than you would in a normal market with normal pricing.

When looking to purchase a second home or make a real estate investment, you should definitely do your homework extensively especially if you are still paying on a mortgage for your primary residence.  Below are some helpful tips on the steps to take when purchasing a second home.

1. Research Your Market: If you are savvy enough to find out everything you can on the Internet, or if you live close to the location where you are thinking about purchasing a new home, condo, or townhome, then you should be able to at least narrow down where you think that you will be making a good investment.  However, it is strongly recommended that you work with a local Realtor in the area in order to find out the best neighborhoods, which communities may have lost their value, comps in subdivisions in the area, and what homes are going to either retain their value or appreciate over time.  A qualified and experienced Realtor should definitely be able to help you out with this information.

2. Know Your Insurance Requirements: If you are looking to buy a second home in the Greater New Orleans area or Gulf Coast areas, keep in mind that you will run into issues getting both homeowner’s insurance and flood insurance if you are purchasing say a beach home or a home in a flood zone.  Before moving forward to aggressively on a purchase, you will want to go ahead and get quotes for insurance on the home or property to make sure that you can afford the escrow on the 2nd mortgage.

3. Research a Good Mortgage: In today’s market, credit has loosened up some, but it is still pretty difficult to quality for a home loan.  Be ready to have cash at closing.  To qualify for an excellent interest rate, you will want to consider putting at least 10% down on the home to drive up the equity.

“It is relatively easy to qualify for a second-home financing,” Bill Banfield, a Quicken Loans vice president says. “There is still a 10 percent down financing option. You can even get cash-out on a second home. There is jumbo financing for a second home. It is a very liquid market.”

4. Be Aware of Taxes: Since you are purchasing a second home, you will not be able to claim homestead on the home unless you make that home your primary residence.  When choosing a location to buy, you may consider buying a home, condo, or town home on the “fringe” of  a popular market in order to save on taxes.

If you are in the market for a 2nd home in St. Tammany Parish in the Greater New Orleans area, Contact Ron Lee Homes to discuss your home building plans.  Call 985-626-7619 or E-mail

Click Here for the Source of the Information.