If you’re thinking about making an offer on a second home in this market – perhaps a property that’ll become your eventual retirement place – here are four things to keep in mind:
1. Never forget that the key to vacation lakefront homes is location, location, location. Sure, this is a cliché, but that doesn’t make it wrong. Before making an offer on a lakefront home, get to really know the area by visiting several times to explore the neighborhoods and check out the amenities.
Aside from exploring during peak seasons. Different seasons bring different vibes to the area. Not only that, but some of the local stores and restaurants may only be open seasonally. You’ll want to be familiar with what the area has to offer during the off-season.
Craig Venezia, author of “Buying a Second Home: Income, Getaway or Retirement,” suggests focusing your search on destinations that are no more than two hours from your primary residence.
“If you have to drive more than two hours, you won’t go there nearly as often as you think you will,” he says. In addition, Venezia notes, the farther away your vacation home is, the harder it’ll be to check on it or visit to take care of necessary repairs.
2. Assess the property’s true rental potential. Lakefront, beaches and mountains tend to be the most desirable locations to pick up rental income when you’re not staying in your vacation home, according to the National Association of Realtors.
If you think you’ll want to turn a place you’re considering into a rental property, check with the town and, if appropriate, the homeowners association, to be sure short-term rentals are allowed — before making an offer.
3. Add up all the costs for buying and maintaining the lakefront vacation home. Mortgage rates are sometimes a bit higher for second homes than primary residences, according to Walter Molony, economic issues media manager for the National Association of Realtors. That’s especially true if you’ll be counting on rental income to qualify for the mortgage.
In that case, the lender will view your lakefront vacation home as investment property. Not only will you probably be required to pay a higher mortgage rate than normal, you may be asked to come up with a down payment of 25 percent or so, according to an article by CNNMoney’s Sarah Max.
You’ll have better luck getting vacation home financing through smaller regional banks, Molony says.
Renting a home to offset your costs will also mean paying additional fees, like the cost of professional property management. This is typically 15 percent of the rental rate to market the property, process tenant applications, manage payments and maintain the place.
4. Before making a bid, sleep on it. Purchasing a vacation lakefront home is often the first step toward fulfilling a retirement dream. Too often, though, this emotional desire causes buyers to rush into making offers. That’s especially true in today’s buyer-eat-buyer vacation home market.
“There is this feeling that you have to buy now because prices are low and mortgage rates are low,” Venezia says. “But you don’t want to be in such a rush that you jump in prematurely. You really want to take your time and do your due diligence.”
So proceed with caution. You’ll want to be confident that the home will not only suit your needs today, but in the future.
But get it right, and the joy of relaxing by the lake could be yours for years to come.
Posted by: Scott Freerksen “The Lake Guy”