Ready to get away or to invest in a property?
Is it time to make a habit of seeing sunsets on the lake or watching wildlife from your very own cabin? Or, would you like to generate income from an investment property? Before you dive in, here are a few things to consider.
Know the ins and outs
First, do you have the funds or equity to purchase that lake home or cabin? If not, you will need a loan, and government loans are not an option for second home purchases.
Financing the home can take one of two main paths:
- You can use the equity in your primary residence to finance the vacation home.
- You may take out a conventional mortgage loan. These loans have fewer restrictions on the type of property you can buy, allowing you to purchase a single-family home or condo.
One of our mortgage specialists would be happy to steer you in the right direction.
Are you going to rent out the home as an income property? The rent can be used to pay the home loan — and you maaaay be able to write off the interest paid on both homes. (Talk to your tax advisor if you’re thinking of doing this!)
Speaking of income property, if you’re investing in something larger, like a 2-4 unit property or apartment complex, you may want to talk to us about a small business loan.
Work with a local real estate pro
It’s always a good idea to work with a local real estate agent when seeking an out-of-town investment or vacation property. (They know things!) Local agents can educate you on the area around the property and point out factors that you may not observe during your previous visits, such as weather, traffic patterns, and other make-or-break details.
Remember the costs of ownership
All of the usual expenses of home ownership apply to a vacation home, including property taxes, insurance, and maintenance. (Sometimes insurance costs and upkeep are higher than you might expect.) If you get insurance quotes before putting in an offer, this cost won’t come as a surprise.
Maintenance and repairs may cost more than usual, depending on the market and access to the location. Ask the local neighbors about these costs, and plan to set aside at least 2 percent of the home’s value for this purpose.
Make a savings plan
If the idea of all of your family descending on the same place year after year sounds like the best time ever, consider how you can make it happen. Our Savings Goals Calculator is one place to start planning for this purchase.
SAVINGS GOALS CALCULATOR – Go ahead and crunch some numbers to see what it would take to make that second home a reality. (If it works out, we’ll be by for a wild game of charades.)