Vacation homes

[shimmy23]

Over the past few years, my wife and I have been discussing the idea of buying property near the WA coast and building a vacation home. Nothing extravagant, 2-3 bedroom, 2 bath, 2car garage, single story.

can anyone offer some advice on how to go about financing this sort of project? I was thinking a construction loan that turns into a mortgage? good lenders or sites to read up?

if you have experience with this, what sort of lessons learned did you have? or what would you have changed?

we would likely AIRbnb the property too. good/bad idea? any advice there?

I'm new to all of this, but i do have 15years of commercial construction experience. residential is so different tho!

[wtwo3]

Originally Posted by shimmy23

Over the past few years, my wife and I have been discussing the idea of buying property near the WA coast and building a vacation home. Nothing extravagant, 2-3 bedroom, 2 bath, 2car garage, single story.

can anyone offer some advice on how to go about financing this sort of project? I was thinking a construction loan that turns into a mortgage? good lenders or sites to read up?

if you have experience with this, what sort of lessons learned did you have? or what would you have changed?

we would likely AIRbnb the property too. good/bad idea? any advice there?

I'm new to all of this, but i do have 15years of commercial construction experience. residential is so different tho!

Following - have also been interested in the idea of a vacation home which pays for itself through platforms like airbnb.

[ppointer]

I have some dated experience here. You have some options:

Work with a builder that already has land that he wants to develop. They typically set up a payment schedule of percentages with specific milestones that trigger payments. You can work with a credit provider to put together a loan that can match those payment milestones.

Another way is also effective, especially if you want to be your on GC, though that is not required. If you outright own the land, you can often find a lender for the construction. Clear ownership of the land is the requirement, though. Once approved, you can find a builder for your specs.

Similar to the first option above, I found a lot that we wanted back in 2009, and the builder was a small, custom outfit. After presenting him the plans, he asked for a very modest down payment and a bank commitment letter, and started the build. We didn't pay anything else until closing. I believe his rationale was that he could easily sell it if we backed out. He was a 100% custom builder, though, with a volume of roughly six homes per year. Loved the home, and I think we just lucked in to that arrangement.

Perhaps the best lesson I could pass on is to visit the site under construction early and often. Try to build relationships with the craftsmen (carpenters, plumbers, electricians, etc.). Whether that is just to commend their work or bring meals, you might get better results if they know you rather than not. Also, sometimes they will have ideas that could improve your project, but they have to be comfortable enough to approach you.

I have done several homes from the ground up. Tight budget and not so tight. My best results have been when I avoided the cheapest route to a decision. For example, first home had formica countertops, and I regretted that for 22 years.

[RickFLM4]

We have a vacation property but it is a condo. We bought pre-construction and didn’t have much involvement in the construction process at all. So sorry I can’t help with that part.

We do not AirBnB. The first two floors of the building are permitted for AirBnB rentals and the top 3 are not. My only advice on that front is to make sure there are no restrictions on short term rentals where you are going to build and factor in the cost of a property manager.

[shimmy23]

Originally Posted by RickFLM4

We have a vacation property but it is a condo. We bought pre-construction and didn’t have much involvement in the construction process at all. So sorry I can’t help with that part.

We do not AirBnB. The first two floors of the building are permitted for AirBnB rentals and the top 3 are not. My only advice on that front is to make sure there are no restrictions on short term rentals where you are going to build and factor in the cost of a property manager.

we're also considering a condo investment since that is where we have been staying when we go. any perks to a condo vs a home in this case? why did you decide on a condo?

[RickFLM4]

Originally Posted by shimmy23

we're also considering a condo investment since that is where we have been staying when we go. any perks to a condo vs a home in this case? why did you decide on a condo?

We spent about 2 years thinking over small house vs. condo. In our case, we can’t use the property a ton (yet) and we were concerned about leaving a house unattended, maintenance, etc. The condo takes care of most of that - just shut the water main off and leave. The condo is also in a great location (downtown Asheville, NC - actually here right now) where there are no houses. It was also new construction at an attractive price and it had limited amenities, which is what we wanted to keep a lid on dues. We have parking and a nice common area, but nothing like a gym, pool, etc.

All that said, there are some downsides. The original construction had some issues (none affecting inside our unit but we had repairs done on our balcony) still being worked through with the builder. I got on the COA Board in large part due to these issues and wanting to make sure they get addressed. There is noise in a condo and, of course, other people. We have different people with different interests - some full time owner-residents, some owners who rent long term, part timers like us and owners who operate short term rentals. Sometimes those interests collide, but most of the time it is ok and generally we like the people here. I do worry about long term maintenance and what that will do to dues, so I’m not sure we will stay indefinitely, but overall we’re happy with it.

[zx10guy]

Check into the mortgage programs you're looking to use. The rules/underwriting has changed recently concerning second homes. The interest rates are going to be much higher. I was looking to possibly refinance my vacation home just before the rates shot up. I was working with a broker on refinancing my primary home and then asked about my second home. She said it's not worth refinancing the loan on my vacation home.

To give you an idea what I'm talking about here, the refinance rate I got for my primary home was 2.874 fixed for 30 years. My vacation home has a mortgage interest rate of 3.25 which I got when I bought the house as new construction in 2012. My broker said she couldn't touch 3.25 with the new mortgage rules.

My vacation home is a single family detached home with 3 bedrooms, 2 full baths, and a 2 car garage. Yet the house is categorized/zoned as a condo. So I do pay HOA and condo association fees. While this may not be ideal on the surface, the nice thing about my vacation home being a condo is that all yard upkeep is taken care of by the management company: lawn mowing, fertilizing, mulch, and trimming of landscaping. The exterior of my home is also covered by the condo association with some limitations such as issues with the door are not covered. I had a stone come undone from my stone front and I just made a call where it was fixed by the management company. The roof is also the responsibility of the condo association. That will be a big expense I won't have to worry about in the future. Being that my vacation home is a condo, I just have to get homeowner's insurance that covers from the walls in. My homeowner's insurance is dirt cheap at a couple hundred a year. Also since my home is a condo, the builder had a 2 year warranty on the home over the standard 1 year they would normally apply.

Another consideration is taxes. I lost a lot of deductions from the Trump tax plan and writing off the interest on my second home was a casualty of the change. You might want to check to see how your taxes will shake out with a second home.

My vacation home is close enough to me where I did visit the construction site pretty regularly. So you might want to think about whether you can fully trust the builder if frequent visits are not possible.

[G MONEY]

I have 12 rental properties. None are Air BNB. I’m happier with 1 tenant to deal with and not tons of random people. My personal shore house we will rent monthly but out of season. If your not going to use your spot, def do some type of rental to offset your costs. Eat of luck with whatever you choose.

[P1]

If you're going to spend the time, money and effort into building something nice, don't go on and Airbnbeat it. Just enjoy it for yourself, family and friends.

[zx10guy]

Originally Posted by P1

If you're going to spend the time, money and effort into building something nice, don't go on and Airbnbeat it. Just enjoy it for yourself, family and friends.

That's why I haven't rented my vacation home. The only time I have someone else using my place is if any good friends need to borrow the house for a place to stay near the beach. I went into the the home purchase with the mindset that I don't need the rental income to afford it. Am I leaving money on the table by not renting it out when I'm not using it? Sure. But the peace of mind of knowing my place won't be destroyed and the ability to come and go as I please at a moments notice makes up for it. The finishes out there in many ways are better than what I have at my primary home.

[dradernh]

I suggest finding a very capable and qualified CPA to advise you. A tax attorney may also be an option. You're looking for a professional who has been advising people in your bracket and situation for at least two or three decades. They've seen and heard it all so many times by now that you're going to get the best of what they have to offer.

Typically, you find these professionals by consulting with relatives, friends, and colleagues who are or have been in your particular situation in terms of life stage, professional status, income level, present family status, retirement planning stage, etc.

Take your time, and find someone you're comfortable with and are confident you can trust.

[billnchristy]

We bought a home in Blue Ridge on election day. Our goal was to airbnb it but once we started putting our time and love into making it ours we decided against it. Like others, I don't want strangers in MY home. If you plan on airbnb'ing a house, I would highly recommend buying one that is completely furnished and you have nothing but monetary interest in. As soon as you put sweat equity into it, you don't want some jackhole banging a hooker on your new vanity.

[wtwo3]

Originally Posted by billnchristy

you don't want some jackhole banging a hooker on your new vanity.

Is that what goes on in these airbnbs?

[dreamingat30fps]

Originally Posted by billnchristy

We bought a home in Blue Ridge on election day. Our goal was to airbnb it but once we started putting our time and love into making it ours we decided against it. Like others, I don't want strangers in MY home. If you plan on airbnb'ing a house, I would highly recommend buying one that is completely furnished and you have nothing but monetary interest in. As soon as you put sweat equity into it, you don't want some jackhole banging a hooker on your new vanity.

I would also not airbnb our vacation house. For one we are here almost 6 months out of the year so I'm not sure how much I would call it a vacation home. Also having rented a condo I owned many years ago... I found I have no desire to be in the landlord business, getting called to repair shit etc. If I were to hire a company to manage all that then that eats away at any potential profits from renting it out.

We have an RV which I did rent out for a while. I found the $$ was not bad and you could definitely pay any expenses associated with it and then some. However it was a lot of work and people do not take care of rental stuff. Inevitably everytime I rented it out it would come back with something broken, filthy etc. Definitely would not want that happening to my house.

The only way I would consider renting it out is if the shit were to hit the fan and I could not use it for an infinite amount of time I MIGHT consider renting it out long term using some kind of management company.

[TboneS54]

A rental property is a great idea! Vacation home not so much.

[ppointer]

Originally Posted by shimmy23

we're also considering a condo investment since that is where we have been staying when we go. any perks to a condo vs a home in this case? why did you decide on a condo?

Got a stand-alone home in south FL and a condo in central OH, while we are FL residents. Went the condo route in OH so that we would count on the HOA to maintain the exterior. Added bonus is that with a unit on either side of ours (three townhouses together), the winter temperature in our unit never drops below 50 even during extreme temps.

We do six months in each location, with separate holiday trips to Ohio to be with family (Thanksgiving, Christmas, spring break). Have the same technology in both locations, such as Nest thermostats, Liftmaster remote garage controls (super helpful to let in vendors when we're out of state), alarm systems and Schlage automated door locks connected to alarm.com for remote control.

I have considered going to a condo in FL instead of the stand alone home, but don't want to give up the private pool we have, along with the 3-car garage.

HOA's are a necessary evil when you go the condo route, though many housing communities these days also have HOA's. I now have to deal with three of them, covering our homes and a third condo we own. I have learned that HOA's are not created and run equally well across the board. But I don't know how to make that determination from the outside looking in. I have two HOA's that are run in a very professional manner, with a third one that manage to stub their toe every month on something. If there is one thing this one does wrong, it is trying to make price the top priority, rather than perhaps sticking with a high-performance vendor for a few years. But how you see that prior to making your purchase, I have yet to learn.

[RickFLM4]

Originally Posted by ppointer

Got a stand-alone home in south FL and a condo in central OH, while we are FL residents. Went the condo route in OH so that we would count on the HOA to maintain the exterior. Added bonus is that with a unit on either side of ours (three townhouses together), the winter temperature in our unit never drops below 50 even during extreme temps.

We do six months in each location, with separate holiday trips to Ohio to be with family (Thanksgiving, Christmas, spring break). Have the same technology in both locations, such as Nest thermostats, Liftmaster remote garage controls (super helpful to let in vendors when we're out of state), alarm systems and Schlage automated door locks connected to alarm.com for remote control.

I have considered going to a condo in FL instead of the stand alone home, but don't want to give up the private pool we have, along with the 3-car garage.

HOA's are a necessary evil when you go the condo route, though many housing communities these days also have HOA's. I now have to deal with three of them, covering our homes and a third condo we own. I have learned that HOA's are not created and run equally well across the board. But I don't know how to make that determination from the outside looking in. I have two HOA's that are run in a very professional manner, with a third one that manage to stub their toe every month on something. If there is one thing this one does wrong, it is trying to make price the top priority, rather than perhaps sticking with a high-performance vendor for a few years. But how you see that prior to making your purchase, I have yet to learn.

If you do go the condo route in FL, be careful about the age and condition of the building. That new inspection law is resulting in special assessments all over the place.

As far as assessing HOA’s you can request all Board minutes, financials (including reserves), repair and assessment history, contractor / engineer reports, etc. to be better informed, but it takes time to go through it all.

[dreamingat30fps]

Originally Posted by ppointer

Got a stand-alone home in south FL and a condo in central OH, while we are FL residents. Went the condo route in OH so that we would count on the HOA to maintain the exterior. Added bonus is that with a unit on either side of ours (three townhouses together), the winter temperature in our unit never drops below 50 even during extreme temps.

We do six months in each location, with separate holiday trips to Ohio to be with family (Thanksgiving, Christmas, spring break). Have the same technology in both locations, such as Nest thermostats, Liftmaster remote garage controls (super helpful to let in vendors when we're out of state), alarm systems and Schlage automated door locks connected to alarm.com for remote control.

I have considered going to a condo in FL instead of the stand alone home, but don't want to give up the private pool we have, along with the 3-car garage.

HOA's are a necessary evil when you go the condo route, though many housing communities these days also have HOA's. I now have to deal with three of them, covering our homes and a third condo we own. I have learned that HOA's are not created and run equally well across the board. But I don't know how to make that determination from the outside looking in. I have two HOA's that are run in a very professional manner, with a third one that manage to stub their toe every month on something. If there is one thing this one does wrong, it is trying to make price the top priority, rather than perhaps sticking with a high-performance vendor for a few years. But how you see that prior to making your purchase, I have yet to learn.

My mom has a condo in Miami Beach. Worst HOA I have ever seen. They are all corrupt as fuuuuuck and steal so much money. It has only gotten worse and worse over time. I would never even consider doing a condo in that area and I would be hard pressed to go back to an apartment/condo period. I don't even care for the HOA at our FL house, but they are amazing compared to the condo HOAs I've dealt with before, not to mention the cost of condo HOAs.

[UncleWede]

Dated, but some gotchas from when we added onto our house in 2000 via construction loan:

1) Interest rate was much higher on construction loan, in the +5% range. Had to hold the loan for 365 days after fully funded. Day 366 I re-financed that sheet.

2) Cash contingency. After all the paperwork was done, and they already knew exactly how much $ was or wasn't in my accounts, THEN they told me they needed a 10% cash contingency. I had a Harley, so I went and sold it back to the dealer. THEN the bank wanted proof I sold the Harley. Well, it's not in my driveway, DMV has the transfer request, and I have a little more than the 10% contingency with a check from Ventura H-D. I had to get the dealer to write a letter that they bought my bike.

3) You want that option to make changes on the fly. Since all the siding came off the existing house, we paid a few extra $100 to have insulation added. Contractor had materials, that was just a bit of extra labor. He also looked at our front porch and said basically he wanted to do "something" to make it look better/different. Made an arch and a front step that added an extra bit of flair. If we weren't living there and checking every day, that might not have happened.

4) The pay/performance helps keep the contractor on schedule. At each milestone where he wanted payment, bank-appointed inspector had to come out and approve. Bit of a hassle, but did help keep everyone on a level playing field. One time he almost didn't approve the plumbing payment. I had bought new plungers for all 3 bathrooms. "What's wrong, is the toilet already backed up?" "No, but it's an inevitable consequence of having a Hispanic women who cooks"


Hey, I have a ready-to-move-in cabin for sale in Alta Sierra, CA. 25 minutes above Lake Isabella.