What is the difference between a second home and an investment property?

Thinking about owning property in Florida? It's such an exciting idea, whether you're dreaming of your own personal getaway or considering a smart investment move. But before you jump in, let's chat about the differences between buying a second home and investing in a property for rental income or resale. In this blog post, we'll break down the key differences between these options in Florida's real estate market.

Purpose of Ownership:

• Second Home: When you buy a second home or vacation home, it's all about having your own little slice of paradise. This kind of property is your getaway spot—a place to escape, unwind, and enjoy some well-deserved relaxation.

• Investment Property: Now, an investment property is a bit different. Here, the focus is on making smart financial moves. You're looking to bring in income through renting it out or banking on its value going up over time. It's all about earning a profit with this type of property.

Usage and Occupancy:

• Second Home: When you have a second home, it's your personal getaway spot. You get to use it for vacations or retreats whenever you need a break, and of course, you can invite family and friends to join you. You will need to occupy this home for a set period of time to qualify for it being a Second Home

• Investment Property: This ones pretty easy, you are using the property to make a profit. It could be an Air BNB, an annual rental, or somewhere in between. 

Location and Property Type:

• Second Home: Your second home will need to be located a certain distance from your primary residence. Some exceptions can be made if your buying a second home in a nearby “Vacation/High Tourism” area. It wont make sense to a lender if your buying a second home a street over from your primary residence. 

• Investment Property: Investment properties come in all shapes and sizes, and they can be located just about anywhere. Your loan type can differ if your buying a single family home vs a multi-family property. There are no restrictions as far as location. 

Financing and Tax Implications:

• Second Home: Financing options for a second home typically have slightly better rates and lower down payment requirements than an investment property. That is why you see some people calling a home a second home when they will be using it as a rental property. You usually cannot write of expenses on a second home.  

• Investment Property: Higher down payments and higher rates due to the slightly higher risk of an investment property. You can typically write off expenses, maintenance, etc… on your investment properties 

Always consult your tax professional to get tax advice and to maximize the benefits of your second home or investment property

Knowing the difference between a second home and an investment property is crucial for making savvy choices in Florida's real estate market. Whether you're dreaming of your own little escape or looking to make strategic investment moves, teaming up with your expert agent at House Match can be your ticket to navigating these options smoothly and achieving your real estate dreams.