Is anyone considering owning a second home? Here are the advantages
An income source
Investing in real estate is a sure way of getting a secondary income. And in any case, the rent accumulated takes care of the EMI hence; there is ease off any loan repayment of the actual purchase amount. At the same time the annual rent increase beings in additional savings.
For future investment
Life still goes on even after retirement. Other activities like children’s education must also be paid hence a secondary home ensures that one has ready finance that will also take care of inflation.
Saves on taxes
The higher income earners easily understand the essence of owning a second home and on the loan basis. It is one way of reducing taxes on their monthly income. And under Section 80 C the EMI enables them to claim the benefits for the principal repaid as well as interest under Section 24 B.
With advantages listed above, there are also disadvantages
One can hardly make any other savings
Owning a second home means you have service the constant EMI which automatically curtails any other form of savings. Lifestyle adjustments must be made to accommodate the regular payment of EMI.
It is not a simple task to give satisfaction to the real estate affairs and especially a resale that call for serious attention to detail. Hence disposing of an asset in times of emergency may not yield fruit or could lead to making hasty decisions culminating in financial losses on the asset.
Other risks associated with owning a second home include high costs of maintenance that could eat into the income. Termination of tenancy whereby the house could remain vacant for long leading to lose of income as well as challenges having to deal with matching the rents in the market.