The Differences Between Buying a Second Home vs Investment Property

In Beverly Hills, every property tells a story, and so does every buyer. Some are searching for a personal escape where they can unwind in total privacy, while others are looking for a steady income stream in one of the most prestigious markets in the country. The choice between a second home and an investment property may seem straightforward, but in reality, it’s a decision layered with lifestyle, financial, and legal considerations.

In Beverly Hills, a second home is rarely just a “spare house.” It’s a pied-à-terre for film producers who split their time between coasts, a seasonal retreat for international buyers who want to be close to Hollywood’s social scene, or a family’s gathering spot during the holidays.

From a financing standpoint, lenders typically view a second home as a personal-use property, meaning mortgage rates and terms are often closer to what you’d get for a primary residence. That said, the bank will expect you to use it primarily for yourself, not as a year-round rental. You might have friends or relatives stay occasionally, but the intent is clear: this is your space to enjoy.

The benefit? You get the luxury of designing the property entirely around your tastes, whether that means a resort-style pool, a chef’s kitchen for entertaining, or a home theater for private screenings.

An investment property, on the other hand, is driven by income potential. In Beverly Hills, this could be anything from a sleek architectural home leased to corporate executives to a gated estate marketed for long-term tenants who value privacy and prestige.

Because these properties are intended to produce revenue, lenders apply stricter criteria: think higher down payments (20–25% is common) and higher interest rates. The projected rental income, occupancy rate, and maintenance costs all factor into the financing decision.

This approach requires a business mindset. You’re not just buying a home; you’re purchasing an asset with a clear return-on-investment goal.

While both second homes and investment properties can offer tax benefits, the rules are very different.

For second homes:

• Mortgage interest and property taxes may be deductible.
• Financing often requires a lower down payment, sometimes starting at 10%.
• Favorable interest rates make them more accessible for buyers wanting a high-value Beverly Hills address.

For investment properties:

• Mortgage interest and property taxes can still be deductible, but rental income must be declared.
  
  
• You can deduct operating expenses and claim depreciation, which are powerful tools for reducing taxable income.
  
  
• The cost of entry is higher, with lenders demanding larger down payments and adding a rate premium.

For both, consulting with a tax advisor is invaluable before making an offer. In Beverly Hills, where property values are substantial, these differences can mean tens or even hundreds of thousands of dollars over time.

The heart of the decision comes down to how you see yourself living—or not living—there.

A second home in Beverly Hills is a lifestyle investment. Owners envision weekend brunches by the pool, evenings spent at local restaurants, or simply having a place that feels like “home” in the middle of one of the world’s most glamorous cities. You decorate for yourself, without worrying about tenant-proof finishes or high turnover.

An investment property is the opposite; it’s tailored to appeal to the broadest audience. Neutral interiors, durable materials, and adaptable layouts keep the home marketable. Your personal footprint is minimal, if present at all. The value is measured in occupancy rates, rent checks, and long-term appreciation.

Beverly Hills has strict rules about how properties can be used, especially when it comes to short-term rentals. Single-family homes, for example, face significant restrictions if you’re planning to list them on platforms like Airbnb. This can instantly change the financial equation for an investment property.

Second homes generally bypass these hurdles since they aren’t meant for continuous rental use. Investment properties, however, require careful attention to lease agreements, tenant rights, and compliance with city ordinances. Overlooking these details can create costly setbacks.

Even a second home needs care; landscaping, pool service, routine cleaning, and security checks when you’re away. Many Beverly Hills owners hire a trusted local property manager to keep things pristine between visits.

Investment properties demand a more structured approach. Tenant screening, rent collection, maintenance calls, and legal compliance can quickly become a full-time job. Professional property management can remove the day-to-day stress, but it’s another line item in the budget that impacts your net return.

Beverly Hills real estate tends to appreciate over time, but the factors driving that appreciation differ between second homes and investment properties.

For second homes, it’s often about unique features, location, and the emotional appeal of the property. Think architectural pedigree, panoramic views, or a coveted street north of Sunset Boulevard.

For investment properties, it’s the numbers: rental yield, vacancy rates, and the health of the local rental market. When buyers are evaluating these homes, they’re doing so with spreadsheets, not just open-house impressions.

There’s no universal answer; only the right fit for your situation. If your dream is to have a personal retreat where you can step away from the world and enjoy Beverly Hills at your own pace, a second home gives you that freedom. If your priority is building wealth through cash flow and equity growth, an investment property might be the strategic choice.

The smartest buyers take the time to run the numbers, map out their lifestyle priorities, and consult with local experts who understand the nuances of this high-value market.

Navigating the Beverly Hills market, whether you’re buying a second home or an income property, requires more than market knowledge. It takes insider connections, strategic negotiation, and an understanding of how to match a property to your goals. That’s exactly what Josh Flagg delivers.

With a track record of representing some of the most iconic addresses in the city, Josh offers the insight and discretion you need to make the right move. Don’t leave your next purchase to chance; reach out today and let your next Beverly Hills real estate investment be your smartest one yet.