Wednesday, March 7, 2007

Second Homes - What are they??: Lending Information from The Mortgage Go To Guy!

What makes a Second home a 2nd Home?

  • That it came in 2nd Chronologically in the purchasing order?
    Well... semantically YES... technically NO
  • That it isn't where you live??
    Well... technically YES ... Semantically NO
So we're fighting Technicalities and Semantics now, eh?

Why do I ask these tough questions?? Because - we Real Estate Professionals in South Florida are surrounded by Second Homes and sometimes the people that own them! Why sometimes? Well... they're called Seasonal because they're here for "Season"... Get it?

No?? People have different measures of season depending on the demographic... suffice it to say, Season here in South Florida is roughly September to April....sometimes more sometimes less - depending on the weather.

We call these people Seasonals or SNOWBIRDS.

In Charlevoix, Michigan, they call people with 2nd homes there FUDGIES. They claim that the out of towners only come for the fudge. Let me tell you this about Charlevoix's TOWNIES... they overestimate their fudge producers and underestimate the beauty of their Lakes, Sunsets and Stargazing places!

What are other names for 2nd Homes?

  • Weekend Homes
  • Weekend Retreats
  • Summer Cabin
  • Winter Getaway
  • House in the Hamptons
  • House on the Shore
  • Cottage in Maine
  • Ski Lodge in Aspen
  • Beach House

From a Lending standpoint - these names all have some commonalities that help us classify them as Second Homes and NOT Primary Homes or Investment Properties. Can you pick them out?

  1. First of all... notice LOCATION LOCATION LOCATION. Typically a Second Home is considered to be Fifty (50) Miles or further from your Primary Residence. So the person in Long Island that buys a Condo in Boynton Beach is further than 50 miles from their Primary during Season eh?
  2. Second of all... Notice Ski Lodge, Hamptons, Getaway, Beach... Those are descriptives that help qualify the property as SIGNIFICANTLY SUPERIOR. What? That 700 square foot hotel room that we bought in South Beach Miami is superior to our 5000 square foot Highland Park, IL house on Vine?... well...Superior means something different... it means BEACH. It means Room Service... it means maid service. Sure, you may have a chef and maid on the payroll but BEACH is locationally superior to Suburb! It doesn't even matter that the square footage or even amenities are less if it if a VACATION home the location makes it Superior.
  3. Third of all... and this is the tricky one... it isn't an investment property!!! What?! I can't Rent it? well... that's where things get grey. Can you rent it is what plagues the equation. The answer is technically NO. Could you let people pay you for staying there for a week or so at a time... well... that really depends on the deed restrictions and how many weeks you actually live there versus rent it out. Technically renting it makes it an investment property.
  4. Fourth... you're really committed to the property being a place that you will use for part of the year and set it up to use it like a second residence. If you buy it and someone else furnishes it for their use - not yours then it isn't right. Now, Condotels come furnished all the time... and some houses do and that's OK. Condotels are pretty much known to be partial year rentals anyway. This is hard to qualify but intent is intent.

What kind of snake oil and I selling?? Well... the type that will hopefully shed some light on this property type for Realtors and mortgage brokers and consumers!! Why? Because it is a


Eh?? What's that??

  • Rates are LOW!
  • Market is DOWN!
  • Plenty of Inventory to Choose from!
  • Your Baby Boomer friends are already looking! (gotta keep up with the Joneses)
  • Hurricanes are a figment of your imagination (riiiiight)
  • You've got that money sitting in your house as equity and it isn't doing ANYTHING for you. (and won't do anything for you stuck in the house!)
  • The dollar $$ is still weak to the British Pound and Euro (i.e. buy now, enjoy, when the dollar comes up and the market does your dollars appreciate as does your property!)
  • Latin American investors are looking HARD at South Florida again!
  • UPDATE: I forgot to mention - check with your CPA - most of them claim that you can deduct the Mortgage interest on a 2nd home - so long as you finance it within 90 days of purchase!

Look No Further than South Florida for a great 2nd Home Value!

More Real Estate News You Can Use from
David A. Podgursky, MBA
The Mortgage Go To Guy!
Your Source for Residential and Commercial Mortgage Loans in Florida

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