There’s a host of questions all second-home hopefuls should ask themselves. To help potential buyers make informed decisions, we asked Houstonians including financial professionals, real estate agents, and homeowners for advice.
Can I afford it?
While the term connotes extravagance, “having a second home doesn’t have to be for the uber-wealthy,” says Suzanne Coppola, owner of local boutique Laurier Blanc, who escapes, from time to time, to her small cottage in coastal North Carolina. “If you’re smart with your money, it can really be a great investment.”
For investment properties, some lenders offer collateral-based loans and programs subject to work completion. These loans are based on what the home could be worth, or what money it could bring in. In other words, the loan is based on the “strength of the property,” explains Texas Loan Star president Laith Daik, and less so on the strength of the traditional credentials a buyer must show when purchasing a primary residence. With these programs, it’s necessary to put down only a fraction of the traditional 20 percent down payment, Daik says.
Going with a more run-of-the-mill mortgage loan for an investment property is always an option, and if you can swing it, it’s probably less of a hassle, Daik says. When it comes to traditional vacation homes purchased this way, for the buyer’s personal use, things are more black-and-white: “It is seen as an extension of your primary residence,” Daik says, and the underwriting is similar, although some lenders require a larger down payment. Still, it might be more attainable than you think: Most buyers need a credit score of around 660, Daik adds, which he says is about a B-plus. Of course, every lender—and buyer—situation is different, so rates can and will vary.
Should I go in with others?
Fractional ownership can make a second home more affordable, but don’t forget the obvious: Splitting the cost with loved ones means splitting the time, too. “Have a clear understanding about how you want to use the space and when you want to use it,” advises Donae Chramosta, who runs a local vintage-designer-goods business, Vintage Contessa & Times Past, and owns a vacation home with her parents in Beaver Creek, Colorado.
“For us it worked out so easily because they go in the winter but not in the aggressive snow months, and that’s when we want to be there,” Chramosta says. Also make sure everyone is on the same page about repairs, maintenance, and other logistics—no detail is too small
House or condo?
Ask yourself how much upkeep you can handle. While condos afford a lock-and-leave lifestyle thanks to amenities and built-in security, detached homes offer more privacy and control over your own space, although there’s often overlap between master-planned communities with single-family homes and HOAs. More second-home buyers nationwide opted for standalone properties in 2018, but it’s really a matter of preference: Homes have yards, and wouldn’t you know it, those yards need mowing.
How much space do I need?
More house always means more maintenance. There are two schools of thought here, and it comes down to how much time and money you want to spend on the upkeep from afar. “Buy smaller than you think you need,” advises Christine Plum, who lives in Houston, owns a construction company, and has a tiny house and a two-bedroom home in Galveston. “The bigger the property, the more there is to maintain. It’s ultimately going to cost you more.”
On the other hand, the additional space could be worth the extra work if accommodating friends and family is a priority. “It’s become a gathering spot,” David Lee, an energy trader and real estate developer, says of his Bastrop cabin that sleeps 16. “We’ve hosted Thanksgiving and other big holidays here.”
Who should I ask for help?
Once you’ve decided on the type of home you’re looking for and where, find a local realtor—working with someone who really knows the area, along with its market, will help you make better-informed decisions. It also might be worth consulting an attorney to bone up on relevant laws such as residency requirements and tax implications, particularly for international properties with unfamiliar or complex regulations.
And, homeowners agree, once you’ve taken the plunge, one thing is essential: an excellent property manager. Whether it’s shoveling snow, watering grass, or fixing a leaky dishwasher while you’re gone, you’ll want a reliable professional to care for your home when you can’t.
Will I want to rent it out?
The answer to this question is important. Last year 45 percent of investment-property buyers nationwide purchased their second homes specifically to generate income by capitalizing on the booming short-term and vacation-rental business. But first things first: If you want a slice of the pie, you must make sure you’re in a place that actually allows it, as some HOAs have explicitly forbidden short-term rentals through services like Airbnb.
“Deed restrictions or any kind of rules give you some protection but can hurt your abilities to do what you want to do,” says John McDonnell, who’s retired from a career as a ship captain and owns a lake house in Montgomery County. “You just have to be aware of them and determine if they are good or bad for you.”
What's the community like?
Whether you’re buying for profit or pleasure or both, you’ll probably rely on your neighbors for help at some point, whether it’s for picking up packages or watering the plants. And remember, you’re part of a community no matter how many days you spend there.
“When we go, we have friends, and we can fall into the community. We even do charity work there so we can give back and be a part of it,” says Chramosta of her place in Colorado. “You create interesting friendships in these locations with people who have this kindred spirit with you.”
What other fees should I expect?
If you already own one home, you know the deal—the mortgage is just the beginning. But the second-home landscape can be a little different. HOA fees, in particular, are common, especially in communities where owners aren’t around 24/7. Pesky as they may seem, they’re often worth it.
“When a property is new, it’s not going to need a new roof or landscaping,” says McDonnell. “But after it’s 10 years old or so, you find communities don’t have any money to make the new or necessary repairs.”
Other considerations include taxes, which are typically higher on second homes, because owners aren’t entitled to traditional homestead exemptions. “Whatever the county appraises it at is what you are going to be paying for it,” says Daik. Insurance, on the other hand, can be lower, if it mainly covers the home itself but not its contents. Still, remember, rates change based on risk: A house on the hurricane-prone coast will almost always be more expensive to insure, as will a rental property with potentially unpredictable guests.
Does this location really work for me?
Be realistic! If you want a second home for R&R but choose one that requires a connecting flight or all-night drive to get there, you could find it’s not worth the investment. “We didn’t want to dread getting in the car Friday afternoon,” says Lee, whose Bastrop cabin is a reasonable two hours outside Houston. “We thought we wouldn’t use it as much.”
Also consider your surrounding area: Do you want to be totally off the grid? Are you really going to cook every meal from your organic garden, or do you want to be near an H-E-B?
How can I save money?
Never forget: A second home also brings a second set of bills. But there are ways to reduce costs. Take advantage of technology to help you keep up remotely. Invest in cameras to monitor outdoor conditions and a Wi-Fi-enabled thermostat that’s adjustable by phone.
Saving money can also be as simple as knowing when—and when not—to outsource work to the pros. “I’ve been the one to paint the fence myself and to plant flowers,” says Coppola of her North Carolina cottage. “Part of it is the joy of going in and trying to have a little bit of sweat equity."