Buying a second home is an exciting financial and personal milestone. With its picturesque landscapes, beautiful summers, and overall luxury, the Hamptons is an exceptional location for one! The allure of the Hamptons motivates many to buy a second home, though some buyers may not have a good grasp on all that buying a second home entails. Just like any real estate market, the Hamptons has its own distinctions that will shape your search.
A worthy investment for your future, a second property can also be an additional income source and provide a retreat from your primary home. The New York Times noted that the Hamptons real estate market
“continue[d] to soar” despite the pandemic, as more people preferred owning a vacation home over renting one. Many city dwellers seek less density and more space, and the Hamptons provides spacious beachfront homes in pristine villages. Redfin reports show that, as of the latter half of 2021, the Hamptons housing market
is strong but slow. Multiple offers are rare, making it a very lucrative time to purchase a second home here.
When purchasing Hamptons luxury real estate, there are many factors to consider - how you'll use the house, local regulations, associated costs, and more. Let’s investigate all of the vital components you need to keep in mind when purchasing a second home in the Hamptons.
Higher Down Payment
A common misconception is that the standard 20 percent down payment for a primary residence also applies to a second home. Potential buyers must take note that they’ll need substantially more upfront capital to purchase a second property. Down payments are typically higher than 20 percent, depending on property cost, applicant credit score, geographic location, and other outstanding debts. Set aside a nest egg for a down payment before you seriously start your home search.
Higher Liquid Capital Requirement
When buying a second property, many financial institutions require a borrower to have liquid reserves equal to a year or up to three years’ worth of payment for fixed monthly expenses. These expenses can include automobile payments, mortgages, monthly condominium HOA or co-op fees, real estate taxes, and bills for any outstanding lines of credit. The amount of liquid capital depends on the loan amount and the applicant’s current levels of debt.
Regulations and Carrying Costs
There are various fees to consider when buying a home, some of which are less intuitive than others. There are expected lawyers’ fees and inspection fees, but there are other specific taxes and costs that should be considered when purchasing a Hamptons property:
: A 1% property tax
for when the purchase price is greater than or equal to $1 million will be paid upon closing.
Peconic Bay Region Community Preservation Fund Tax
: This 2% tax
is only in effect in Southampton, East Hampton, Shelter Island, Riverhead, and Southold. The tax is used to support conservation efforts within the various towns. In Southampton, East Hampton, and Shelter Island, any purchase of over $250,000 of improved land or $100,000 of vacant land is taxed. In Riverhead and Southold, purchases of over $150,000 of improved land
or $75,000 of vacant land are taxed. First-time homeowners may qualify for certain exemptions.
Besides the associated fees, there are also various zoning regulations and ordinances to be aware of. This information can be a lot for a potential homebuyer to keep track of, so work closely with your realtor to help you navigate the costs and regulations when purchasing a Hamptons property.
Location, location, location!
This famed mantra is especially applicable in the Hamptons market since each area possesses different economic, architectural, and lifestyle aspects. Each neighborhood has its own charm and residential architectural style. For example, if you prefer classic architecture, you’ll enjoy Sag Harbor’s 19th-century aesthetic over the contemporary homes found in other communities.
The local color of each area also varies greatly. For instance, Montauk’s residents tend to be younger, so Montauk’s culture is lively versus Sagaponack’s quiet, tranquil atmosphere. Those searching for an area with a thriving, art-forward culture will appreciate Southampton Village’s many galleries and restaurants.
Though you don’t need
to live in a specific neighborhood to delight in its culture and benefits, traffic in the Hamptons is a concern. The traffic gets especially bad during the summer, so if proximity and ease of travel are essential factors to you, you’ll want to find a home in the neighborhood that appeals most to you.
How You Use the Home Matters
There’s a multitude of reasons buyers choose a second home in the Hamptons. Perhaps you want to invest in a rental property or desire a vacation home to enjoy from time to time. Maybe you’ll only use it for a few weeks at a time, for the entire summer, or for whatever period of time you choose! Conversely, you may be looking to settle in the Hamptons permanently.
Your unique reason for buying the home will dictate where you look and which properties will fit your needs. For instance, if you seek a rental property, you’ll need a thorough understanding of the rental permit and rental period regulations for each Hamptons submarket - on top of choosing a location attractive to potential renters. If you want a second home that you can travel to and from at your leisure, your top priority will be finding a relaxing, beachfront home with an easy commute.
If you won’t be a permanent resident, you’ll need to proactively find a local property management service to take care of all your home care needs while you’re away. Managing the house yourself, from coordinating home inspections and repairs to sourcing and managing vendors, etc., can be a tedious and exhausting process. A dedicated home management service is key to maintaining your part-time Hamptons residence!
Pick a Knowledgeable Real Estate Agent
When buying a Hamptons home, one thing is certain - you need insider knowledge to pursue this venture. Therefore, it's crucial to work with local real estate professionals who specialize in Hamptons real estate sales.
With an experienced broker by your side, you’ll save time. Your real estate agent will inform expectations and make tailored recommendations based on your desired property style, amenities, and community ambiance.
The Breitenbach Advisory Team
, led by Matthew Breitenbach, is the perfect team to contact when looking into buying a Hamptons property. Matthew and his team of professionals possess local expertise and unrivaled regional knowledge. When seeking Montauk, East Hampton, or Bridgehampton homes for sale, look no further than this esteemed group of experts.
Don’t Rush the Process
As with any sizeable investment, finding the right Hamptons home takes time. Between touring available inventory, understanding the differences between neighborhoods, adjusting your expectations, and dealing with any obstacles that pop up, it may take months before you find that perfect property.
Depending on what you’re looking for and when, your search may take longer than expected. For instance, if you begin your home search in winter, it may be difficult to assess the property’s potential as a summer vacation house. Avoid this frustration and potential delay by starting your search in the spring.
The last thing you want to do is hastily buy a new home without doing your due diligence. Buying a property on a whim can lead to serious buyer’s remorse. Do thorough research to ensure you can afford the home in question and that it fits your needs.
By now, you’re well aware that many factors influence purchasing a second home in the Hamptons. This extraordinary task will be less daunting when approached thoughtfully and with the right realtor by your side. Get your financials in order, scope out the ideal neighborhood, and go forth with gusto!
Ready to check out some incredible Bridgehampton real estate? For further information, contact Matthew Breitenbach today.
*Header credit: Mark Sagliocco/Getty Images for Hamptons Magazine