Answers to the questions frequently asked by Summit County investors and second home buyers.
- What are my property management options in Summit County? If you don’t live in the county you can hire a full service property management company. These companies will handle everything for you. The reservations, the cleaning, the emergency repairs. Expect to give around half of your rental income to them. Your other option is to hire a flat-fee management company. They charge you a flat rate to manage your condo regardless of how often it is rented. They will hand out the keys and arrange the cleaning. Reservations and repairs are typically your responsibility to handle. If you live nearby, you can always opt to handle the management yourself.
- What will the rate of return on my investment be? The best return on your investment will be the memories you and your family share. Don’t count on a monetary return on your investment. If there is one that is great, but don’t plan on it. Buy a rental house in the city if that is your aim.
- What can I expect to make in rental income? It all depends. How much is it rented and when, and how much will you use it yourself? Additionally, the company that manages it takes a percentage of the rentals, ranging from 35% to 50% plus some expenses. The more business you can help to create for them the more money you will make. We have average and projected figures from several management companies we will be happy to supply to you.
- Do I need a clubhouse if I want to put the property on a rental program? You do not need a fully equipped clubhouse, but most people ask for hot tubs at least. Having access to a hot tub and/or clubhouse will improve your rental income by 20% to 50%, depending on which management company you talk to and if the hot tub is communal or private. If rental income is important to you I would not buy a property without access to a hot tub.
- What insurance coverage will I need? If the home is more than $500,000 and will be used as a second home, most insurance companies will require a security system that will notify someone if the temperature falls below a certain level. If you are renting the home or condo, be sure to tell your insurance agent. Your rates will be higher, but unless you disclose the rental situation you may not be covered if you have a claim. If you own in a condominium complex the insurance on the building is usually included in your dues. You should still carry contents and liability coverage. If you do not have a homes association, you will need your own insurance.
- What are the interest rates when I finance? For a second home the rates are comparable to what you will pay for your primary residence. If you plan to use the property only as a rental the interest rate will be about ½% higher. If you use it yourself and rent occasionally you can probably get by with a second home rate, but it will depend on the lender. Many people start out thinking they will use it only as a second home, but change their minds once they close and decide to rent.
- What are the tax consequences if I use my home as a rental? The IRS has specific rules regarding what expenses are deductible and how many days a year you can rent your property without having to declare the income. (It is not many!) Please check with your financial advisor as your situation is unique to you and will be different from mine and your friends and neighbors.