Overcoming Financial Challenges for First Time Second Home Buyers

Many families come to the beautiful beaches of South Walton and Destin on vacation and dream of owning their own beach vacation home or condominium one day. A beach vacation home can be a solid investment that can be passed along to future generations while providing enjoyment to families along the way. In addition by placing a vacation home or condominium on a vacation rental program, it can also help to offset costs of home ownership and help underwrite mortgage payments.

The challenge for many is how to get financing and gathering cash for the down payment. One option for first time investors is to search for Fannie Mae approved properties. While there are restrictions and strict guidelines, there are many Emerald Coast properties that are on the “approved” list. The benefit of a Fannie Mae approved property is the flexibility of the down payment, which could include a down payment as low as five percent.

For families who find a home or condominium for sale in Destin that they love but discover that it is not on the approved Fannie Mae list, an experienced Realtor can help get a property approved. A veteran Realtor will have relationships with insurance carriers, lenders, homeowner associations, among others, and will have the relationships and skills to coordinate with all parties to get a property considered for Fannie Mae approval.

Another option for financing may be a second mortgage. If a potential investor has equity in their primary residence, there is the option to take a personal equity line of credit or a second mortgage. One thing to consider is that potential investors may experience better success with their own local bank in their city of residence instead of a Destin bank, when seeking a loan based on a personal home or other investment. However for investors with normal financing who plan to pay the 20 percent down payment, it may be more beneficial to select a Destin bank that understands the Destin market.

Bottom line is that any family with good credit has options. In some instances, buyers may benefit from owner financing in which the seller is the lender. If the seller does not need the full amount right away, this option offers flexibility for the buyer and principal plus interest for the seller.

It is important to note that a real estate investment is different than other types of investments in that there are regular and annual expenses. Once the financing is determined, potential buyers will want to estimate all expenses, including assessments, taxes, insurance, as well as the cost of repairs and maintenance. Rental income helps offset some of these expense so reviewing rental history for the property or similar properties is recommended to determine the net positive or negative return on investment for the year.  It is important to note that more personal use of the vacation home will result in less rental income, so being realistic is important in the budgeting process.  
Many buyers find that a Destin real estate investment is a great option. Over time, strategic real estate investments increase in value, allowing the owner to sell for a profit and upgrade if desired.

Eva Pickens is a REALTOR with Newman-Dailey Resort Properties in Miramar Beach. She has been a licensed real estate agent since 1984 and specializes in condo and home listings and sales along the Emerald Coast. She can be reached at eva[at]sunnydaydestinsales.com or call 850-837-1071.