WHAT TO KNOW BEFORE BUYING A LAKE HOME

For those of us who were fortunate enough to grow up in lakes country, childhood  memories are filled with minnows caught off the dock, sandcastles built along the  shore, and marshmallows roasted around the campfire. As we grow older and have  children of our own, many of us dream of purchasing a lake home and sharing those  memories with another generation.    Purchasing a lake home can be one of life’s most exciting moments. But without  proper preparation, it can also be one of life’s most stressful decisions. We sat down  with a panel of experts to find out what you need to know before purchasing a  lakefront property. 

Do Your Research   
Whether you are purchasing an existing home or building your own, make sure you  research the land, the lake, and the responsibilities that come along with them.    Les: There are a lot of rules and regulations to be aware of, especially if you are  purchasing a lot to build a new property. You cannot build anything closer to the lake  starting at the high water mark. And before you build anything, you need to be so  many feet behind your neighbor’s boundary line.    Wendy: Unless it’s a brand new construction, usually a lake home has started as a  cabin and has been built on due to setback regulations—if you were to tear it down  and build new, you would have to go further away from the lake. So you have to make  sure that all of the setbacks meet regulation.

Be Prepared to Spend   
Many buyers are surprised when they discover the additional costs that come with  purchasing a secondary property, especially on a lake. Knowing about these costs  ahead of time can allow you to budget accordingly and avoid financial strain later on.    Vikki: The down payment on a second home is 10 percent, as opposed to 0 to 5  percent, because a second home poses a greater risk. If you fall into hard times, what  will be the first thing to go? Not your primary residence.    Colleen: All lake home owners should consider getting liability insurance. There is  greater liability associated with a lake home—say, if you have a guest over and they  fall off your boat and get injured. You need to make sure that you are adequately  covered. Depending on the elevation of the property and where it sits versus the lake,  it may be in a flood zone. If it is in a flood zone, then you will be required to have flood  insurance. So you really need to consider that flood insurance is an extra expense as  well.   

Opt for Year-Round   
Even if you anticipate primarily using your lakefront property in the summer, Vikki  recommends purchasing a year-round home over a seasonal cabin. Opting for  year-round will not only allow you to trade in your jet ski for a snowmobile and enjoy  beautiful winters in lakes country; it can also save you money.    Vikki: In order to be considered for long-term fixed rate financing, the home needs to  be suitable for year-round use versus just a seasonal cabin. Sometimes it’s an easy fix;  I've seen seasonal cabins that truly just needed a heating source in all rooms. It could  be as simple as protecting the well so that it can sustain winter.   

Get Inspected   
Every single one of our experts had one piece of advice in common: get an inspection  before you buy.    Wendy: An inspection will always be money well spent. An appraiser can tell you that  the house is there and that it’s worth the value; we will not be able to tell you how  long your furnace is going to last, or your appliances, or when you need to replace  your windows or your roof.    Jon: An inspection is non-negotiable. Lake homes are unique in that they sit empty for  a lot of the year, so they are more subject to things going wrong. If something  happens with the water, it could run for a week before anybody notices. With cabins,  we often run into deferred maintenance, or neglect. 
 

Make a Plan   
When you finally take the leap and purchase your lake home, the last thing you want  to think about is what will happen to it when you are no longer around. But setting up  a cabin trust ensures a plan for the property’s future—allowing your family to enjoy the  property for many generations to come.     Jon: A common scenario for cabins is that mom and dad have four kids. Once mom  and dad are gone, the costs of upkeep on the cabin continue (taxes, upkeep, repair of  toys, etc.) when the four kids inherit the cabin. We encourage clients to set up either a  cabin trust or an LLC for the cabin which sets the rules for the cabin after they pass  away, most specifically how expenses are paid and the mechanism for the siblings to  buy each other out if people don't want anything to do with the cabin.   

It’s a Great Investment!   
Les: I don’t think a lake home will ever go down in value. It’s a great investment, plus  you get to use it and enjoy it. They’re not making any new lakes. As long as it is a  decent lake and property, there will always be a strong market.    Vikki: Owning a second home is work. It’s another lawn to mow, another home to  clean, a dock to stain. But I would not give it up for anything. The memories made with  our friends and family trumps it all!    Purchasing a lake home doesn’t have to be a challenging experience. With a little  research, a plan for the future, and the right experts on your side, you can start making  your own Lake Life memories—without the stress.   

Our Contributors:    Leslie A. Anderson, Attorney at Leslie A. Anderson, Ltd.   Wendy Caswell, Owner and Certified Residential Appraiser at Caswell Appraisal  Colleen Karst, Senior Vice President and Mortgage Lending Manager at Choice Bank  Vikki Miller Johnson, Vice Presidents and Mortgage Loan Officer at Choice Bank  Jon Schindel, Attorney at SeilerSchindel