Real Estate Broker · Staunton, VA · Member since 2019 · 194 posts · 216 votes
I decided to post this in the STR forum instead of Loans because I think we'll get better responses from those of us in the STR world. In recent podcast #364, Avery Carl discussed her ability to purchase vacation rental homes with a 10% down loan. Can anyone recommend lenders with this option?
Lender · Knoxville, TN · Member since 2018 · 54 posts · 98 votes
6y
@Chase Hoover I am happy to provide info or speak with you about the 10% option and qualifications for that. The STR market is my lending specialty! @Karen Chenaille it is not really feasible for spouse's to get another second home loan in the same market within a short time-frame. Keep in mind the second home loan with 10% down is underwritten with the intent of the property being used as a second home so it is not typically seen as reasonable that a married couple would have separate vacation homes in the same market and this may cause underwriting issues. In the last couple years technology has gotten a lot more efficient at flagging these situations, so it is not something I would recommend taking a risk on.
Lender · Tampa, FL · Member since 2020 · 182 posts · 90 votes
4y
@Tiffany Kho this is correct. If it is a 10% down second home you must retain control over the property. It cannot be under the control of a property management company. It has to be available for your use since you are buying it as a second home with the intent of using it at least part of the year. There is not minimum number of days you have to go on vacation (i.e. no 14 days requirement). Any lender that has a requirement like that is lender specific.
If you purchase it as strictly an investment property, it can be under the control of a management company.
New to Real Estate · San Francisco · Member since 2021 · 27 posts · 16 votes
4y
@Jeff Shumway thanks so much for the explanation. This confirms what I thought to be true.
I talked to a loan officer yesterday and she said that if the home has an existing property management company in place from the prior owner and prior bookings that extend into your ownership, you can’t keep that same company or the bookings, but you’re able to hire a new company. Has anyone heard that before?
I would only want to try long-distance short-term rental investing if I could hire a property manager.
New to Real Estate · Chicago IL · Member since 2017 · 13 posts · 2 votes
4y
I'm glad to see this thread - what is the difference in terms for the second home mortgage vs the standard 20% down investment loan? Is the rates and amortization similar?
@Chase Hoover if you buy it as a 2nd home you can put just 10% down. @Parker Borofsky posted on @Avery Carl podcast discussion board on the in’s and out’s of this. We have used this approach to acquire 1 property in all the markets we have properties in. If you and your spouse both make enough individually you could each get a loan in a single market.
@Karen Chenaille, could you please explain how it would be possible for you and your spouse to both have vacation home mortgages in the same market?
Springfield Gardens, NY · Member since 2017 · 12 posts · 3 votes
4y
@Jeff Shumway Great info! I have a question about the below which has been tripping me up a bit. I recently closed on a property with the 10% second home financing, but I want to do STR when I'm not using the property. If I own the property in my name, but create an LLC to run the STR business, does this now mean I'm not "retaining control over the property." I hope this is not a silly question Lol. I'm new to this rental thing, and trying to get myself organized.
Investor · NH · Member since 2020 · 175 posts · 75 votes
4y
@Patrick Moore From what I know, the second home mortgage will have a lower rate with lower fees. Downside is you will have to carry PMI and also live in the property for 14 days or 10% of the time it is rented.
New to Real Estate · Chicago IL · Member since 2017 · 13 posts · 2 votes
4y
@Cole Britting great info. I actually talked to a very knowledgeable broker yesterday and got some good insight. Speaking in complete generalities the 2nd home option is around 4% with current rates and the investment loans are around 4.75. Good numbers for analysis.
New to Real Estate · VA · Member since 2021 · 6 posts · 6 votes
4y
Love seeing this thread. I just have a clarifying question regarding the 10% down second/vacation home loan... Does it mean you HAVE to be physically using the property for a minimum of 14 days of the year to qualify for those types of loans? I understand the different tax implications for whether you rent more or less and 14 days out of the year, but I am hung up on how much you have to physically use the property and what are the rules/laws constituting what "use" is. For example, if you live in New York and purchased a vacation property with 10% down in Montana to STR the majority of the year (lets say for 350 days its live, 15 days short of a full year for tax purposes) but you could only feasibly take a 7 day vacation once a year, is that a problem?