Typically, yes and yes. Definitely is using a conventional loan.
Perspective from the NC coast:
Hard numbers are available to project very closely what your operating expenses will be, especially if you hire a vacation PM and you choose a property designed as a vacation investment property. Your biggest unknowns are usually the weather and insurance (my background is coastal resort property, speaking from that perspective only).
When dealing with a broker in a resort area, ask her/him to provide an analysis of their best 3 or 4 performing sales in the last 6 months. Any credible broker in that industry can immediately produce that because that was the basis on which they were sold. Otherwise get a new broker.
Given that information, you can apply your particular loan scenario and then stress test it thoroughly - hurricane, no snow, pandemic, Air BNB ban, ect, ect.
Prior to Air BNB, most of the properties we sold were negative on paper and often in reality. I've been out of that market since then, however, resort markets and urban markets have dealt some serious blows to Air BNB owners, one can read about that online easily.
The best resort homes may also be sited in precarious situations that affect access and insurance, including dreaded federal flood insurance.
Outside of pure enjoyment and tax advantages for high earners, these properties are a stretch for new investors in my experience. A substantial resort property requires the capital and expertise of a small business. I would advise approaching it as such, and with equal caution. Imagine, $175,000 in gross rent in negative CF means your operating cash needs are over $175,000 annually. Many costs are fixed and remain whether income is generated or not. Buyers that can sustain that for 2, 4, 8 months are not typically inexperienced investors.
We sold many properties with six figure income that had before tax losses - negative cash flow. Properties priced $250,000 to $750,000 typically fared the worst and probably still do. Above $750,000, a shrewd owner could turn a before tax profit and generate an after tax loss. Do you see what a niche market some resort property is? There are very few buyers who are truly able to call them investments; they are purchases.
As a storehouse of generational wealth, they tend to do very well also. But again, this is not a large group of people. Owning a paid for resort property for more than 20-30 years has produce huge capital gains for some of our past clients, for oceanfronts it can be staggering.
The economic cycle we are entering should be a strong consideration as well. Resort real estate is among the riskiest - first to fall, last to rise in demand cycles, far more difficult to borrow on. Its easy to get in and difficult to get out in many cases.
