Several factors have seen the proposition of second residences next to a primary residence take center stage for many individuals, from aspiring expats and savvy investors to retirees and those searching for a reliable sanctuary abroad. The allure of an enhanced lifestyle, experiencing a new culture and way of life, and the potential for accessing tax benefits have all contributed to the growing appeal of securing second residence and a second home away from home. 

This article will look deeper into the idea of second residence, discussing the reasons behind its growing popularity and the benefits of a new residence and buying a second home abroad. Additionally, we’ll outline the steps to buying a second house as an investment property to gain residency or citizenship status in a foreign country. 

What are second residences?

second home vs primary residence investment property monthly mortgage payment second home mortgage payment new york times primary residence rocket mortgage real estate fha loans homeowners insurance capital gains tax veterans affairs new home real estate market bank accounts spare time personal finance closing costs home equity loan mortgage interest rental property mortgage loan monthly mortgage payments conventional loan fannie mae debt to income ratio taxable income second home buying a second home keep in mind years of experience personal use lender requirements primary residences difference between a second higher credit scores many homeowners fha loan fha loans interest rate home equity loan rental property primary sources conventional loans utility bills down payment bottom line first step full time home equity permanent resident operating expenses investment property loans homeowners association fees tax breaks second mortgage lower interest rate how much time helping people key takeaways financing options irs publication 14 days more money local real estate agent home equity line tax benefits conduct research purchase price large amount slightly higher more interest second mortgage payment tax purposes generating income higher down payment own personal use remain vacant higher risk stricter requirements most cases fact checked may be able fannie mae debt to income ratio taxable income second home buying a second home keep in mind years of experience personal use lender requirements primary residences difference between a second higher credit scores many homeowners investment property primary residence second home vs federal housing administration second home vsThe phrase “second residence” carries a dual interpretation, encompassing both the ownership of a second home and legal residency status in a different country. Concerning migration, second residences refer to individuals or families who are legal residents in a country other than their country of primary residence or citizenship. 

Individuals may purchase second homes and investment properties strategically to facilitate temporary or extended stays in the host country. Second residences in migration contexts are frequently sought after for reasons like investment, retirement, lifestyle enhancement, or business opportunities. 

Investment properties and homes can be a stepping stone towards legal residency or citizenship. They offer a tangible connection to the host country and open avenues for international mobility.

Reasons to Purchase a Second Home

We provided a brief overview of second residence, the motivations behind hiring a real estate agent to acquire second homes abroad, and the demographics of those interested in purchasing or putting a down payment on a house overseas. Nevertheless, the advantages extend well past typical rationales like personal finance, potentially resonating with a diverse spectrum of individuals.

Second homes and investment properties purchased abroad can offer numerous benefits and serve various purposes for individuals and their families. Here are some reasons why people might consider purchasing second homes:

Vacations

One of the primary reasons for buying a second home abroad and gaining a second residence is to have a permanent vacation home for getaways and relaxation for part of the year. Having a dedicated vacation home beside a current primary residence to unwind and escape from the demands of daily life can be incredibly refreshing. 

You get to experience all the benefits of overseas vacations while savoring the familiar comforts of home in a personalized setting.

Investments

An essential factor in acquiring investment properties such as rental property revolves around long-term investment returns, potentially leading to capital appreciation over time. Whether a property for rent or a personal second residence, your investment property could become a valuable asset if the country where you’re buying a second home has strong growth potential. 

Investment property with high growth potential can help you reach your personal finance goals much sooner. Should you have mortgage debt on your current home, you can leverage your second home purchase to repay additional mortgage lenders. 

Rental income

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Investment properties in desirable locations can help meet lending requirements and access lower interest rates or a second residence mortgage interest deduction. Second homes with potential rental income are more likely to qualify for a favorable second residence mortgage.

Furthermore, generating rental income helps to offset the costs of maintaining an investment property, including property management, repaying mortgage lenders on more than one unit, and other expenses associated with owning second homes and investment properties. You can also deduct property taxes. 

Diversification of assets

Diversification is a common strategy for investors, and owning an investment property, or even a second home that is owner-occupied, diversifies your investment portfolio beyond stocks, bonds, and other traditional assets.

Acquiring investment properties are a solid investment, providing stability and diversification that other investments might not offer, particularly for investors who own a primary home in one country and a second home in another. This limits exposure to economic turmoil or downturns occurring in one country, which can lead to higher interest rates or reduced buyer interest in a second home or investment property. 

Tax benefits

Owning a second home or investment property can potentially be a great idea for tax purposes in optimizing your tax situation, but it’s important to note that the extent of these benefits varies based on local and federal income tax laws and regulations. The way the Internal Revenue Service (IRS) defines taxes, such as sales and property taxes, or how they tax rental income, may differ from His Majesty’s Revenue and Customs (HMRC). 

In some jurisdictions, you might be eligible to deduct mortgage interest payments to a mortgage lender and property taxes for both primary residences and a second home and investment property. 

Additionally, if you decide to rent out either an investment property or your second home to earn rental income, you could deduct charges incurred during the mortgage process and expenses related to property management, maintenance, and other allowable costs. The bottom line is this makes the overall cost of a second home purchase generally cheaper, and you can make enough money to pay off a second home loan and potentially the current mortgage of your primary residence. 

Retirement

Some people purchase vacation homes or a second home abroad, intending to retire there in the future, making it their main home. A second home can serve as a pre-retirement vacation home, transitioning into a full-time retirement home later. An added benefit is depending on where the second home purchase is made, retirees with second homes can secure long-term residence by investment through the purchase of their second home.

Inheritance

Owning a second home holds significant legacy and inheritance planning advantages. Whether you seek a second home or an investment property, individuals can establish a tangible asset that can be transferred to future generations, without further mortgage payments attached to it. 

Furthermore, the value appreciation of the second home over an extended time frame can contribute to the financial well-being of heirs, offering them a potential source of wealth and stability. Second home equity can be both a practical and sentimental gift, carrying forward the legacy of the original owners while providing tangible benefits for generations to come.

Citizenship and residency

Purchasing second homes has historically centered around the following:

  • The privilege of possessing both primary homes and second homes, such as a townhouse or apartment, and a beachfront property or a secluded lodging.
  • Investing for future returns
  • Generate rental income to earn additional income, bolster a retirement pension, or pay off conventional loans
  • An inheritance to pass on to future generations
  • A home to retire in

An increasingly popular motivation to buy second homes abroad is the opportunity to obtain second citizenship or second residence in the country where the purchase is made. Many governments have introduced immigrant investor programs, granting second citizenship or second residence to foreign nationals who purchase second homes or investment property in the country’s territory.

Citizenship by investment, or investment visas, commonly known as Golden Visas, offer distinct advantages to foreign individuals acquiring a second home as a strategic move. These immigration programs streamline the ease of doing business abroad and conducting financial transactions internationally, making them especially valuable for those seeking a long-term approach to overseas investments, as well as offering tax benefits.

Second Homes versus Investment Properties

Choosing between purchasing either an investment property or a second home abroad as a second residence involves considering your financial goals and personal preferences. A second home provides home equity and a personal residence or vacation home for relaxation. It offers many second homeowners a second residence by providing a familiar retreat from a primary residence in a preferred location. Generally speaking, depending on the country, it could be cheaper than buying property in the investor’s home country.

However, it comes with maintenance costs, potentially a second home mortgage, and other fees that may become burdensome if it’s not owner-occupied or generating income should it remain vacant.

On the other hand, an investment property abroad is acquired primarily as a property for rent to generate income or potential capital appreciation for other investments or down payments on additional investment properties.

While they offer potential financial gains, they require careful management and may involve legal considerations and adjustments for tax purposes in the foreign country. Deciding between the two depends on whether you prioritize a personal residence or a revenue-generating asset, as well as your willingness to handle mortgage interest or other factors and responsibilities that come with each option.

Properties purchased as second homes for a second residence may have different mortgage requirements to an investment property loan. Consider your financial circumstances, credit score, and the lending requirements for a second home mortgage or investment property loan. A second home loan could have higher interest rates, whereas loans for investment properties could mean lenders require a larger down payment or more extensive mortgage terms.

Dynamics of Second Residences

Acquiring a second residence permit can bring about varying entitlements and advantages, notably temporary residence permits versus permanent residence permits.

Second residences can be acquired in the form of temporary or permanent residence status, two distinct legal statuses granted to foreign nationals, each offering varying degrees of rights and privileges.

Temporary residence

Temporary residence refers to a residence permit allowing an individual to live in a country for a specific period, often subject to renewal. The duration of temporary status can vary significantly across different second residence countries. In certain nations, it might include a one-year residence permit; in others, it can extend to a residency of ten to twenty years.

Temporary residence is generally suitable for those who intend to stay temporarily, such as students, temporary workers, or individuals seeking seasonal experiences. Temporary residents usually have access to basic services, like healthcare and education, but their rights can be more limited compared to permanent residents.

Permanent residence

On the contrary, the meaning of permanent residence is in the name itself, granting permit holders the right to live indefinitely in a country of which they are not citizens. Temporary residents can typically transition to permanent residents after a certain period of lawful residence, which can vary depending on the country’s immigration laws.

Permanent residence often comes with more extensive rights, such as the ability to work certain jobs, access to social services, and a path to applying for citizenship by naturalization. This status holds appeal for foreign nationals considering second residences and acquiring a second home overseas, as it provides a sense of stability and integration.

This allows them to enjoy the benefits of a second residence without concerns about the legal aspects of maintaining their residence status and second homes or investment properties.

Residence by investment

Numerous investor immigration initiatives have emerged, redefining the conventional understanding of temporary residence. Despite its inherently non-permanent nature, many governments permit investors to renew their Golden Visas indefinitely, effectively providing a form of permanent residency status.

Nonetheless, an investment-based second residence program providing an indefinitely renewable residence permit mandate that individuals maintain their investment property to renew their permits.

Here is a list of common residency by investment programs and their durations.

Program

Minimum Investment

Duration

Renewable

Terms

€300,000

Permanent residence

Not required

Maintain the investment for five years

€250,000

Renewable permanent residence

Not required

Maintain the investment indefinitely

€250,000

Two years

Renewable for three years

Maintain the investment until eligible for permanent residence after five years

€110,000

Renewable permanent residence

Not required

Maintain the investment indefinitely

€500,000

Two years

Renewable for three years

Maintain the investment until eligible for permanent residence after five years

€500,000

Two years

Renewable for three years

Maintain the investment until eligible for permanent residence after five years

$800,000

Two years (conditional permanent residency)

Not required

Apply to remove conditional status after two years

Not applicable - Permanent residence

Not required

Not required

No investment criteria, provided investors adhere to the program's requirements

Resident versus Tax Resident

A significant contrast exists between maintaining residence status and being classified as a tax resident within a particular country. Simply possessing residence does not inherently indicate tax residency; conversely, being a tax resident does not necessarily imply holding residence status.

“Resident versus Tax Resident” refers to these two distinctive statuses:

  • Legal residence to reside in a country
  • Tax residence to file a tax return in a country

A person will be considered a resident if they possess a residence permit allowing them to live in the country. This often involves meeting specific criteria, such as staying in the country for a minimum number of days.

On the other hand, tax residency is determined by a country’s tax laws, which may consider someone a tax resident if they spend a significant amount of time – usually over 183 days in a year – or have specific or sustained economic ties to the country.

Being a tax resident generally subjects an individual to that country’s second residence tax regulations, requiring them to report global income and potentially pay taxes there. Several countries present tax systems featuring notable fiscal incentives, permitting investors to choose these nations as their designated tax residence in return for investments or an annual tax fee.

Here is a list of two available programs:

Program 

Requirements 

Tax Benefits 

Hold a Portuguese residence permit 

• Special tax treatment for ten years


• Second residence tax deduction on foreign income 


• Free remittance of funds to Portugal 


• Reduced tax rate on Portugal-sourced income 

Hold a Greece Golden Visa or possess a majority share of a Greek company 

• Special tax treatment for 15 years 


• Remit any amount of foreign income in exchange for a €100,000 annual tax fee 

It is advisable to seek tax advice from an international tax professional when considering putting down payments on second homes abroad or the idea of earning rental income from a second home or investment property.

Obtaining Second Residence

Numerous pathways are available for individuals seeking second residences. The choice ultimately hinges on your personal circumstances and goals. These routes to a second residence encompass an array of possibilities, each tailored to cater to various preferences and needs.

Whether you’re interested in investment programs, retiring aboard, or new work opportunities, understanding the avenues at your disposal will ensure a well-informed decision that aligns with your unique situation and aspirations.

Reunification

Individuals who already hold citizenship (or, in some instances, residency) can petition to be reunited with their family members. This usually applies to close or immediate family members, including children, parents, spouses, and legal partners. Some countries extend the right of family reunification and second residence to siblings, grandparents, and even nieces, nephews, and other extended family.

Marriage

Marriage to a national is generally a qualifying criterion for a second residence permit. While it technically falls under family reunification, many countries separate the two, with an application process solely dedicated to foreigners married to citizens.

Business

Often referred to as entrepreneur or startup visas, numerous countries are willing to grant second residence permits to foreign entrepreneurs who establish new businesses or invest in existing ones. This can be anything from presenting your business plan for an innovative business with growth potential, investing a certain amount of money in existing large or small businesses, and hiring a minimum number of citizens.

Investment

Second residence by investment programs allow you to essentially buy second residence by investing through one of the program’s pre-approved investment options. Approved investments usually include:

  • Purchasing a second home or commercial property
  • Bank deposits
  • Purchasing government bonds
  • Contributing to national development funds

Several EU countries, like Portugal, Greece, and Cyprus, offer Golden Visas allowing investors to obtain EU residency in two to six months. The cheapest investment program in the EU is the Malta Permanent Residence Program, starting with a minimum investment of €110,000 through renting a property.

Purchasing a second home or property for rent to gain second residence typically starts from an investment of €250,000.

Global Citizen Solutions offers a tailored service to investors and expats seeking a second residence. Our team of migration specialists is here to assist you with foreign property investments to secure an alternative residence.

Retirement

If you meet a specified age criteria and can prove sufficient monthly income, you can qualify for second residence through what many countries offer as “retirement visas.” These long-term second residence programs are popular in Latin American countries, commonly called Pensionado programs.

The eligibility criteria vary from country to country. Panama’s retirement visa is eligible for men 62 and over and women 57 and over. However, there is no minimum age, but younger applicants do not have access to certain benefits of the program.

Some countries may require the funds to come from a government pension or retirement account to qualify for the visa and second residence, while others are okay with seeing a regular source of income coming into a bank account.

Self-sufficiency

Proving that you have enough funds or sufficient income to support yourself is a common way many expats, remote workers, and retirees have secured a second residence. Numerous countries have special second residence programs granting residency to foreign nationals who meet their foreign income or savings requirements without needing to seek work in the country.

The Spain Non-lucrative Visa will grant Spanish residence to non-EU/EAA and non-Swiss nationals who can present a monthly income of at least €2,400 or savings of €28,800. The Italy Elective Residence Visa grants residency to foreign nationals with an annual income of at least €31,000.

A much cheaper income option for an EU self-sufficiency second residence permit is the Portugal D7 Visa, which requires a monthly income of €820.00; however, the program necessitates a continuous Portuguese bank deposit of €19,840.

Advantages of Second Residence

Expat lifestyle

investment property days a year 14 days per year second homes home mortgages personal residence passport make money mortgage rates home mortgages least 10 tax deductions financial decisions part of the year main residence buy a second home 10 of the days property management company higher interest rate mortgage lender second homes larger down payment higher interest 14 days per year days a year investment propertyIf your primary goal is to live in a country, obtaining an alternative residence is the most straightforward path to achieve that. Common questions arise, such as “Is there a way to extend a Schengen Visa beyond 90 days?” and “Can I renew my visa without doing visa runs?”

The easiest way to avoid those circumstances and live a true expat lifestyle is by obtaining a second residence. Certain nations are lenient regarding frequent tourist visits, but numerous others are increasingly imposing stricter regulations and border controls.

The once-effective visa runs have lost their effectiveness. Even popular visa-run destinations such as Thailand and Indonesia have taken measures to curb this practice. Moreover, countries like the US and the UK have maintained a reputation for stringent visa enforcement.

You can steer clear of these complications by obtaining a residence permit, granting you the legal right to live in the country without the limitations of tourist visas. Set up your whole life in an alternative country or enjoy unrestricted freedom of a second home abroad.

Dual citizenship

A legitimate motive for acquiring second residences, particularly for those with broader objectives than mere residency, is the prospect of naturalization and dual nationality.

Obtaining a second residence can serve as a pathway to dual citizenship by facilitating eligibility for naturalization in the host country. While the process for obtaining a foreign passport varies between nations, the primary consideration to be naturalized in a particular country generally revolves around maintaining second residence for a certain period.

By establishing an alternative residence, individuals often fulfill a critical requirement for applying for citizenship.

Dual citizenship gives individuals the advantage of acquiring a second passport, offering a range of practical benefits.

Dual passport holders enjoy enhanced travel freedom with additional visa-free access, and full citizenship rights in the country mean no restrictions on entry, the right to vote, and full property ownership rights.

Tax benefits

As mentioned earlier, being a resident doesn’t exactly indicate tax residency, and vice versa. However, in most countries, a stay of more than 183 days will categorize you as a tax resident, therefore, altering your tax situation. In contrast, spending less than 183 days in a country typically results in the loss of tax resident status.

This is particularly advantageous for foreign nationals acquiring second residence in countries with lower taxes than their home country. The loss of tax resident status eliminates the obligation of paying taxes, and gaining tax residency in a low-tax country reduces the overall tax burden.

Another discussed advantage was obtaining tax residency in countries offering special tax regimes. These tax regimes allow residents to potentially benefit from favorable tax treatments and incentives in exchange for investments or flat annual tax fees.

US citizen taxes

While most countries employ a residency or territory-based tax system, US citizens are bound to a citizenship-based taxation system. The tax implications mean transferring your tax residence won’t automatically result in paying reduced taxes and tax benefits, as the Internal Revenue Service (IRS) defines all US citizens as tax residents whether they reside in the US or abroad.

Nevertheless, a US foreign-earned income tax credit of $120,000 allows US citizens living abroad to reduce their tax liability if they legally reside overseas substantially. This tax credit acknowledges the taxes paid to a foreign country, offsetting the amount owed to the US government to reduce the overall tax burden.

Political and economic diversification

second home vs 14 days first home buy a second home investment property money interest rates tax deductions investment property home mortgages mortgage interest second homes part of the year buy a second home least 10 days a year 10 of the days 14 days per year second home vs main residence financial decisions second home mortgages 14 days first home least 10 tax deductions financial decisions part of the year main residence buy a second home 10 of the days investment property fha loans second homes buying a second home 14 days first home 14 days first home 14 days first home second home vsThe primary goal for many seeking second residence is financial optimization and diversification. Foreign home buyers or investors who own investment properties overseas diversify their assets, potentially minimizing risks associated with an overly concentrated portfolio, such as high interest rates, and reduced rental income or potential buyers.

A second home or investment property expands their financial opportunities across different markets. Additionally, an investment property or second home located in an area experiencing rapid economic growth can offer potential appreciation in property value, yielding attractive returns on investment over time.

Regarding political diversification, second residences can provide individuals and their families with an alternative living option in case of political instability or unfavorable conditions in their home country. This strategic move ensures access to a haven and maintains a certain quality of life despite uncertain circumstances.

Changes in a political environment often occur rapidly, and a solidified alternative residence offers a crucial safeguard, allowing individuals to swiftly relocate their lives and families to a stable and secure environment when needed.

Second Residence Misunderstandings

Second citizenship

There’s a common misconception that second residences and second citizenship are interchangeable, but they’re distinct concepts. Second residence grants the right to reside in a country, while second citizenship grants full citizenship rights and a second passport.

Resident of nowhere

A common grey area in tax law created a loophole that enabled numerous travelers, especially digital nomads, to evade tax obligations by not establishing definitive tax residency. This used to be true; nonetheless, the growing trend of globalization and the expansion of temporary visa options have prompted stricter measures against tax avoidance through constant border-hopping.

Ending second residency

Immigration investor programs undergo constant modifications, and regrettably, recent changes have not been advantageous for those seeking second residences. Certain countries that had second residence by investment programs for some time have decided to end them, while others have doubled the minimum investment criteria.

These changes transpire due to shifts in policy priorities, economic considerations, and the need to make sure that the programs align with the country’s long-term goals and interests. That’s why Global Citizen Solutions is the ideal choice to aid you in your second residence aspirations. Our team of specialists sources up-to-date information and criteria, ensuring successful residence applications and foreign investments.

How Can Global Citizen Solutions Help You?

Global Citizen Solutions is a boutique migration consultancy firm with years of experience delivering bespoke residence and citizenship by investment solutions for international families. With offices worldwide and an experienced, hands-on team, we have helped hundreds of clients worldwide acquire citizenship, residence visas, or homes while diversifying their portfolios with robust investments. 

We guide you from start to finish, taking you beyond your citizenship or residency by investment application. 

Frequently Asked Questions about Second Residence

Can you have two primary residences?

You have the option of maintaining both a primary residence and an second residence, and either one can be considered your principal residence based on your personal choice and the duration of your stay.

What is a second residence?

A second residence is possessing the right to residency in a second country through family reunification, a work permit, or investment such as owning a second home.

Why do people acquire a second residence?

There are multiple reasons why people acquire a second residence; these include:

  • Seeking a higher standard of living through a better climate, cheaper living costs, and new cultural experiences
  • Expanded business opportunities or investing in countries with favorable economic conditions
  • Accessing quality education opportunities in reputable institutions
  • Retiring in more affordable or appealing locations
  • Benefiting from special tax concessions or lower tax rates on income and capital gains on second residence
  • Having a secure place to reside during political instability or in uncertain political environments
  • Gaining travel freedom, such as access to regional mobility alliances like the Schengen Area
  • Safeguarding assets like investment properties by diversifying across different jurisdictions
  • Providing a haven for family members in case of emergencies
  • Acquiring investment property to earn rental income or capital appreciation, or a second home for vacations

What does country of residence mean?

Country of residence is where a person lives, works, and contributes to the local economy. It’s their official legal residence and affects tax obligations, legal rights, and access to services.

Can I use my second residences as vacation rentals?

Laws regarding vacation rentals vary by jurisdiction. Some forbid private residences from being used as vacation rentals. Others allow certain investment properties to be listed as vacation homes, depending on the location and visa restrictions.

What are the second residence drawbacks?

Owning a second home offers numerous advantages but has several potential drawbacks and considerations. Financially, acquiring, maintaining, and insuring a second home can strain budgets, especially when factoring in property taxes, utilities, and maintenance expenses.

Depending on the tax laws of an individual’s home country and second residence country, they could be double taxed, obliging them to pay capital gains tax on the sale of second residence properties in their home country and country of overseas residency.

The real estate market can be unpredictable, making property valuations risky. Renting out property also poses challenges such as dealing with management companies and vacancies. Regulatory changes may impact property ownership and rentals. Some cities have banned short-term rentals, while others only allow renting rooms in personal residences.

Can you buy a mortgaged second home in another country?

When buying a second home abroad, the process, requirements, and mortgage terms can vary significantly from one country to another.

Buyers typically work with local banks or mortgage lenders in the country where they seek a second home loan. Lenders evaluate the buyer’s financial background, credit score, and property value before offering a mortgage.

Legal and regulatory considerations, currency exchange rates, tax implications, and residency status in the foreign country also impact mortgage requirements and access to financing programs.

Can I obtain citizenship through second residency?

Purchasing a second home abroad can lead to citizenship through residency or investment programs. Some countries offer citizenship by investment programs that grant individuals citizenship in exchange for a significant investment in the country’s economy.

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