“I’m going to the cabin this weekend!” How many times have you heard that from a neighbor, a friend or a workmate and thought that dream of a 2nd home is out of reach for you. Think twice. Second homes are in reach for almost all of us. Mortgage expert Carrie Guarrero has created this dream many times over for her clients, and sits down with Tim Murphy to debunk the myths around what it takes to get into your dream getaway. In this episode, you’ll learn:
- If you really need 20% down to finance a second home
- The 3 most important things when considering a second home
- The one thing you need before considering renting your 2nd home
- And more
Should you consider buying a cabin in Minnesota?
After this episode, you’ll soon be saying to your friends, “I’m heading to my cabin this weekend!” Enjoy.
To contact Carrie for more information, head here
Special thanks to Carrie Guarerro for hosting us this week, and thank you for listening to the Edina SW Minneapolis Advice Givers Podcast
Producing Branch Manager
Carrie Guarrero: 00:00 You know, uh, being in this land of 10,000 lakes, Tim, it’s just kind of a Minnesota staple. Everybody grew up going to somebody’s cabin if it wasn’t there.
Announcer: 00:11 Welcome to the Edina Southwest Minneapolis advice givers podcast. I’m going to the cabin this weekend. How many times have you heard that from a neighbor, a friend, or a workmate thought that dream of owning a second home is out of reach for you. Second homes are in reach for almost all the bus, fairway independent mortgage expert Carrie Guarrero has created this free many times over for her clients and sits down with Tim Murphy to debunk the myths around what it takes to get into your dream. Get away. In this episode you’ll learn if you really need 20 percent down to finance a second home. The three most important things when considering a second home, the one thing you need before considering renting your second home and more and now outside on a beautiful, sunny, Edina day or maybe not, here’s Tim Murphy.
Tim Murphy: 00:56 Carrie, have you ever heard of Murphy’s law? Yeah, absolutely. So today we are shooting our podcast with Carrie and we are out any Dinah at centennial lakes and you know what it was supposed to be perfect. Is supposed to be 80 blue skies, beautiful weather. Well, Murphy’s law hit and today it’s raining. Carried. Didn’t you hit hail on the weekend?
Carrie Guarrero: 01:22 A little bit of Hail on my way and that was fun. We had hail.
Tim Murphy: 01:26 Uh, there’s a little wind and our buddy back here is blowing leaves. So you know what it’s going to be an exciting episode today.
Carrie Guarrero: 01:35 We’re excited to be here and we’re gonna roll anyway because that’s what we do, right? So we do, man, this is real life, right? It is indeed.
Tim Murphy: 01:42 So, Hey Carrie, the, one of the things I wanted to hit on was I read a really interesting article by us news and it talks about does it make sense to buy a second home? What are your thoughts on that?
Carrie Guarrero: 01:55 You know, being in this land of 10,000 lakes, Tim, it’s just kind of a Minnesota staple, right? Everybody grew up going to somebody’s cabin if it wasn’t their own. I know I loved going up to Virginia and I have fond memories of getting on four wheelers and weapon through woods or to headed to duluth right after this. I am headed to duluth right after this and our favorite spot is up in madeline island and I was just looking at some memories from last year and one of my twins said, can we stay for another week? And you know, that’s just kinda lake life is a Minnesota staple. So second homes are something that we need to talk about in Minnesota. 10 Thousand Lakes man.
Tim Murphy: 02:42 One hundred percent agree. I mean right when we’re done, I’m heading up to brainerd, right? The leg. So I’m one of the things that they said was owning a second home may sound like something only the wildly rich do, but that isn’t always the case. What do you have to say about that?
Carrie Guarrero: 02:55 That’s absolutely positively not the case. I work clients every day. Who, number one a, inheriting cabin properties is a, something is a common occurrence because they’re passed down from generation to generation. It was grandpa’s cabin then it was mom’s Gavin. Now it’s my cabin, so we do a lot of remodeling or updating to those homes, a little down payment compared to what people think. I have a lot of conversations to him where I answered the phone and they’re like, hey, I, I read this and I heard that I need to totally see in the article you said you have to have plenty of money to have a second home. You know, I guess that’s a relative term. What is plenty of money, right? But you don’t need 20 percent down, which a lot of people would think that you do.
Carrie Guarrero: 03:44 So I think that the plenty of money aspect, tim probably lends more into maintenance repairs and making sure that you can afford the payment. Right?
Tim Murphy: 03:54 So if I don’t need 20 percent down, how do, how do you solve that problem? Because I thought for sure I would need 20 percent down.
Carrie Guarrero: 04:00 You don’t need 20 percent down for a second home if you’re actually going to utilize it as your second home and it’s not an investment property, but your second home that you are going to be visiting throughout the year and spending time there. You don’t need 20 percent down and in fact interest rates are very comparable to a primary residence is to, if your going to occupy that property as your second home throughout the year.
Tim Murphy: 04:24 What about debt? I mean, you know, obviously I have a first house right now. I’m taking on a second home. I mean, what do I have to think about as far as my, whether it’s a debt to income ratio or the additional expenses of owning a second home. I mean, what, what’s my concern?
Carrie Guarrero: 04:38 There are three things that I always counsel home buyers about when they’re looking at second homes or investment properties. Quite frankly, the number one thing is reserves. You know, I, I talked to every one of my clients about what if something happens? You know what, what if there’s a job loss or God forbid there’s a temporary disability loss of income. Some sort, are you going to be able to continue to pay that payment so don’t get so worried about, again, debt is relative so to how much income you make. Right? But in the article they talk about the debt to income ratio. Sure. Right? Sure. Well, but if you have money in the bank, that’s where the magic is, right?
Speaker 1: 05:22 Because who worries when they have six months of reserves in the bank in order to subsidize payments or debt load if they need to, then there’s not a big concern if something happens a month or two and you need to make up or a refrigerator goes out and you need to. So that’s the number two thing I would say money in the bank in order to subsidize payments. If something happens. Number two thing is maintenance and repairs. I mean you’re a homeowner already, right? So you know that the water softener goes out or the refrigerator goes out. Man, last week I walked into my kitchen, tim and I stepped into water and I was like, this is not good. What just happened? And it was coming from the refrigerator and I’m like, well yeah, we’ve only been here, this is a brand new refrigerator really?
Carrie Guarrero: 06:09 And I’m like, what is going on? But the, again, Murphy’s law, it happens, it just happens. And so being prepared for those things is important. And when you have a second home, it’s just that added layer of potential for maintenance and repairs. So a maintenance, that’s the third thing. Who’s gonna take care of this property. Everybody has these grand thoughts like I’m going to go to the cabin every weekend and then life happens and you have weddings and you have funerals and you have events, right? And you have other things that don’t allow you to go to the cabins. So. But the lawn still needs to be mowed and the lake still needs to be taken care of and you know, just that standard maintenance stuff still needs to happen. So making sure that there are provisions and slash or that you know, you’ve set up for people to take care of those.
Tim Murphy: 07:02 The other thing is too, a lot of lake property has like, well and septic and things that you might not have if you live here in the suburbs. Absolutely. So I mean, what do I have to think about as far as expenses or what do you calculate to help me make sure that I’m taken care of there? I mean I don’t, I don’t even know what a well or septic is.
Carrie Guarrero: 07:17 Sure, sure. You know what? I have a lot of clients. In fact I was working with one just last week who was absolutely positively want to be in an association for my second home. You know, we’re sitting here and there are a lot of them where they’ve set up little communities right where they have an association and they’ve got a maintenance guy that’s running around taking care of the grounds and it’s a great setup for people because they can plug in and just like the homes that we’re sitting here looking at today.
Carrie Guarrero: 07:49 You know, there’s a, there’s town homes and the leaf blower guy is out there blowing leaves and so goes the situation in an association for a lake home. So, um, you know, that’s one thing that I would say if somebody is really concerned about maintenance or whatever, those opportunities exist out there. Right? But the second thing would just be do your research, you know, know what you’re dealing with. So if you’re not familiar with well and septic and you’re going to now own one, if it was your primary residence, you would get familiar with it, right? You would know what you were dealing with, you would know what pumping out your tank looked like. You’d know what doing a well test look like. I can do a lot of those things. Tend to find all that information for sure. Absolutely. And we help guide people through that as professionals, right?
Carrie Guarrero: 08:37 We deal with that stuff every day, so it’s not something to be overly scared of. Okay.
Tim Murphy: 08:43 Another thing that people talk about when we’re talking about debt is, well, hey, if maybe my debt to income ratio is too high or maybe I don’t have just enough reserves, you know what, in today’s digital age, I’ll Vrbo, airbnb. I mean, I’ll just rent it. What are your thoughts on that?
Carrie Guarrero: 08:58 Huge, huge new thing, right? Um, it’s so funny. I was just traveling myself and we absolutely did that. We went and rented somebody’s apartment for a week and it was awesome and I would just caution folks that there is a big difference between a second home and an investment property. Number one. Uh, yeah. Second home, you’re actually going to primarily use that for your own personal use cabin, right? Right. It’s a cabin at someplace you’re going to plan to go to every weekend or whatever throughout the summer.
Carrie Guarrero: 09:32 Family with your friends, enjoy it. Right? But if you have a couple times a year that you decide, hey, I’m going to rent it out on weekly cabin rentals.com or whatever the name of those sites are, a, you go ahead and do that, but don’t count on that income. I go back to my first statement, make sure you’ve got reserves because if you count on that income and then it doesn’t happen and that puts you in trouble, I don’t want you to be there.
Tim Murphy: 10:00 Okay. So from a financing perspective, am I allowed to do that?
Carrie Guarrero: 10:04 As long as. So that’s where I sat. All right. If that’s just happening once or twice a year, not a big deal. You get into nightly rentals, et Cetera, and that’s a totally different kind of loan that is a commercial property, right? There are actually documents that you signed that say I am not going to rent my house out on a daily basis.
Carrie Guarrero: 10:25 Right. So that’s just, there’s a big difference between the two and I am happy to help walk people through those variables.
Tim Murphy: 10:34 Like there’s a lot of different options and there’s, well if this then that. Right?
Carrie Guarrero: 10:38 You know what? People get scared, they read articles and they go, hey, I can’t do this or you know, I’ve got to be extraordinarily rich in order to make this happen. Bottom line, they just need to pick up the phone and let’s walk through it. And if the time’s not right now let’s make a plan to get to where you want to be. Will carry you. Just read my mind because point number five in this article is a whole of this seems a lot harder than it looks. It’s not.
Tim Murphy: 11:06 Yeah, I mean, it sounds like you have it all figured out. All I gotta do is just call you and we’re good to go.
Carrie Guarrero: 11:11 Well, the media would love to complicate things, Tim, you know, loans for those of us that do them every single day. And we’ve done a lot of them. We get that for you. It’s not something you do every day, right? But that’s why you call upon the professionals to help you establish a plan to get to where you want to be.
Tim Murphy: 11:33 So what are your thoughts, you and off our little episode here on the u s news article. I mean, what should people think when they read this stuff?
Carrie Guarrero: 11:41 You know, uh, like I just said about, uh, the media scaring people, I think don’t disqualify yourself. I think a lot of news articles put seeds of doubt in people’s minds. And then they just don’t make that phone call, they just don’t send that email, they just don’t apply online. Don’t let that stop you. Check it out. What do you have to lose?
Tim Murphy: 12:05 Well, and especially when you got someone with your experience on the side window article says that it looks a lot harder than it seems. Maybe if they contact you it will be a lot easier than it seems. Well, we love to make it easier what people think.
Tim Murphy: 12:20 Carrie, thanks a lot for coming on today. I love talking about this subject.
Carrie Guarrero: 12:23 Absolutely a pleasure to be here.
Announcer: 12:25 If you would like to learn more about Carrie Guarrero and Fairway Independent Mortgage, head to EdinaAdviceGivers.com While they’re subscribed to advice givers by clicking the itunes or stitcher link and make sure to follow us on facebook and instagram to get behind the scenes photos and video from this episode. Special thanks to Carrie Guarerro and thank you for listening to this week’s episode of the Edina-SW Minneapolis Advice Givers Podcast!