Any thoughts to share on my plan?

Question

Looking for some advice from experienced investors or those in the same boat.

I live in Arizona and visit family in Georgia pretty much every year.  The market where my sister lives has some pretty affordable homes and I was thinking about buying a home there. A couple ways to go about it.

The particular home I found is about $80k. It is a 3 bed, 2 bath- has 1 bed and 1 bath upstairs, with a full kitchen, den, living room and 1250 Sq ft. It also has a basement with another bathroom, a standalone sink that could become a kitchen/kitchenette, and 2 rooms that can be used as entertainment areas or bedrooms as listed.

One option is to buy as a vacation home, with 10% down, and then use the basement as an airbnb rental. I also thought about letting a family members stay there on the main floor, either free or for well under fair market prices.But I am not sure the extent to which that would be allowed since vacation homes are not supposed to be rented out- altho I would think an airbnb type wouldn't matter if it's just a part of the home, since people rent out their primary residence all the time, but I obviously don't know. I did talk to a lender and she said that airbnb and renting to family isn't allowed, but I keep finding stuff that says it is allowed.

Other option is to just buy as a rental property, with 20% down. I am looking at refinancing my primary home so that I don't have to use my savings for the down payment. Then I would think I have more flexibility to my use - whether I want to do airbnb, or a long term rental of either the main floor or basement.

Also, it is near a military base, about 30 minutes away, not sure a long term rental to someone on base would be more worthwhile than airbnb.

Sorry this was so long! Just starting out and would love any feedback!

Alexus Wenstad · Answer

@Dustin Allen thanks Dustin! I just got off the phone with my current lender and he says buying as an i vestments is probably the safest bet, to avoid issues down the road. He also said we could discuss with underwriting prior to moving forward with either option to make sure I meet the requirements for the second home. But with the amount I can take out with a cash out refinance, the 20% down will be doable without touching my savings, which was all I wanted to avoid- I have the money but would like to keep it.

Alexus Wenstad · Answer

@Alexus Wenstad in follow up to my original post, it looks like I will be going the I vestments property route, using cash from a cash out refinance of my primary home. Any agents in the warner robins, ga or surrounding areas that are familiar with working with people looking for good investment properties?

Alexus Wenstad · Answer

@John Underwood thanks John! My only concern is the risk involved with doing the second home route and ending up screwing myself with the lender down the road. I totally get the not renting to family bit.

Dustin Allen · Answer

@Alexus Wenstad

That sounds like a good plan!

Dustin Allen · Answer

@Alexus Wenstad

A “second home” loan is not supposed to be used for income. If you buy as a pure investment property, you will have a lot more options in how you use the property.

You may get a lot of demand as a STR or as  a long term rental with that military base. I imagine a lot of people come to visit or do shorter term work in the area. Just make sure you’re honest with your lender about intentions for the property. If you’re not, it’s called mortgage fraud.

John Underwood · Answer

Why not buy as a vacation rental and just block out the calendar when you want to go visit your sister? I wouldn't rent to family. This is a recipe for disaster.