With Florida’s scope of activities and gorgeous range of properties, it’s easy to be daydreaming about owning a home on Sanibel or Captiva Islands or a condo in Naples. Whether it’s time to retire, bring your kids to the beach, or split your time for work, settling into a relaxing area with access to the ocean is never a bad idea. If you’re ready to buy a second home, take some of this advice to make sure you’re following all the right steps and are fully prepared.
Pinpoint the Reason for Buying
Though you may be familiar with the process of residential home-buying, purchasing a second home certainly has some differences, especially if it’s not simply a vacation home. One of the best ways to start the research process off right is to determine your reason for buying the home.
You may be looking to use this property as an investment and rent it out to serve as a solid stream of income. This endeavor may require more careful budgeting and insurance coverage. Another reason you may be on the market is to find a commuter home if travel is a big part of your day-to-day work life. Additionally, your search may be initiated in order to purchase a nearby home for your aging parents or family members. Lastly, and potentially the most popular, a second home is often acquired to function as a vacation spot that is lived in seasonally.
If you’re hoping to get a commuter home or purchase a place for your aging parents, you may want to consider something smaller than the traditional, single-family home. You’ll want to avoid purchasing a bigger space than you need, which will in turn keep your mortgage payments and general maintenance costs lower. In this case, you may want to look into purchasing a condo, apartment, or townhome. Determining what you need out of a space personally will help you find the best fit.
Research Insurance Policies
In addition to all the extra costs that come with owning a home, factoring in expenses on a second property is a whole new ball game. Aside from the additional mortgage, you’ll have to start paying more than typical for homeowners insurance. If your home is a vacation spot and you’ll only be there for part of the year, you run the risk of missing problems within the home and being susceptible to theft. Another big reason for the insurance price is that your home will probably be in an area that sees more inclement weather, leaving you at the risk of hurricane/wind damage at a beach house or wildfires at a cabin in the woods. These may require additional coverage or specialized insurance.
If you’re hoping to rent out the property, homeowner’s insurance may have coverage for short- or long-term rentals, but you may want to consider landlord or rental dwelling insurance instead. If you’re bringing in a significant amount of income this way, the home will become a business asset rather than your primary residence, and you’ll want to make sure it’s covered accordingly. Using a booking service, like Airbnb, may mean you’ll be opting for their insurance and protection plans when you list your property. You may also want to talk to a tax professional about logistics, as the deductibles and tax implications will differ depending on whether it’s a residential or investment property.
Factor in Additional Costs
Other expenses that you should consider when looking into the upkeep of a second home are maintenance and utilities. It can be helpful to look for places within driving distance to make sure you’re able to check in on your property. You may have to become familiar with winterizing a property and doing regular maintenance each season to ensure your house stays in prime condition. This could mean making sure the lawn is mowed, inspecting the roof, and clearing the gutters.
If you’re leaving your home vacant for long periods of time, figure out a way to reduce energy costs when you aren’t around so that your bills aren’t astronomical. You may also want to install a security system on your property to prevent break-ins and to keep your home safe from floods and fires.
Figure Out Financing
Another significant difference when buying a second home is the type of mortgage loan that you will get. This, again, depends on the reason you’re buying and the overall use of the home. Each lender will have specific qualifications for a second home versus an investment property, depending on the amount of time you reside in it versus renting it out to others. For vacation homes, people often use a jumbo loan or a conventional loan, which each has its own requirements. Discussing options with your lender based on your goals for the property will fast-track the process.
Since second homes are more of a risk for lenders, the down payment is typically more, the credit scores needed are higher, and the debt-to-income ratio must be lower. You’ll be paying more upfront and have a higher interest rate on the mortgage. After making a budget to pay for this additional mortgage – potentially factoring in rental income – you can start the financing process. Getting a mortgage loan pre approval will ensure that you start the home buying process with the best possible idea about what you can afford. Discussing ideal locations, communities, and features with your spouse or family ahead of time will streamline the house hunting process, especially if you bring a realtor in early.
Make sure that you’re fully prepared to take on this challenge and financial responsibility. If you’re not ready for this venture, you may be sacrificing future stability and financial goals like retiring comfortably, traveling, or paying off long standing debts.
Select an Experienced Realtor
When it comes to exploring new areas to settle or purchase a second home in, you’ll want to choose an experienced Realtor in order to navigate the intricacies of the local properties and ordinances. The details of purchasing a second home are generally much more complex, and the area that you’re looking in can have specific regulations that you must be aware of ahead of time. This is where a local realtor can really alleviate some of the pressure.
Look for Realtors that are certified by the NAR as Resort and Second-Home Property Specialists or locally certified with a Sanibel & Captiva Islands Specialist Designation (SCIS). In Southwest Florida, buying a second home on Sanibel Island may prove to be a little more tricky, especially if you’re hoping to renovate, as there are land use and development restrictions. Discussing your goals for the property and potential expansions – like a pool or dock – with your realtor will ensure that all of your expectations are met and that you aren’t blindsided after you’ve completed the home buying process.