Important Things to Consider When Purchasing a Second Home
Many of our clients own or aspire to own recreation property or second home. Usually their search falls into 1 of 2 categories:
(1) Vacation Rental – A vacation rental is the renting out of a furnished apartment, house, or professionally managed resort-condominium complex on a temporary basis to tourists as an alternative to a hotel. The term vacation rental is mainly used in the US – Wiki.
Rob’s Advice: Even if you are purchasing a vacation rental out of state, start a conversation with us. The advantage of talking to us is that we belong to a network of top agents all around the country. We can evaluate the agents in the market you are looking into and refer you to a well qualified agent.
(2) Recreation Property – A recreation property is property, usually nearby, use for recreational purposes, such as a lake house or a piece of land with a hunting cabin.
Rob’s Advice: To those buying recreation property or property that needs maintenance: keep it within an hour/hour and a half drive from their home. If it is three hours away, in most cases we see clients selling those properties in a year or two. The areas close by that make great recreational property are Hocking Hills, Buckeye Lake, or Apple Valley. Many don’t realize but we do actually work out there and that’s still within our market. This year alone we’ve closed on properties in Apple Valley, Buckeye Lake, Hocking Hills, and even hunting land in Portsmouth.
If you’re looking into buying a recreation property, let us help you! Our top team has experience with all the hot spots in Ohio, we can help you find what you need.
An important thing to consider when purchasing a second home is banks are typically looking for a larger down payment. You’re not likely to receive as attractive of an interest rate. Banks realize that if things go sideways for you, the last thing you’ll give up is your primary residence. If you have an interruption in your income or fall on hard times, you’ll let your secondary residence go. Because second homes are higher risk, the bank will charge higher interest rates and require more skin in the game.
Some of our clients are surprised to find out that banks typically require higher down payment and higher rates for second homes. Depending on your situation, a blanket loan may be a good solution for you. A blanket loan allows you to purchase the other property without any more money down and combine the debt on your primary residence. It’s a way to secure the collateral for the secondary property.
Example: you own a 500K house, have 400K equity on it. Buy a 300k property and instead of paying 150k in down payments you combine the two to now have 800k in property with 400k down and not have to bring money to closing.
If you have any questions about buying a second home in or outside of Ohio, contact us and we can help in any way!