Curbed University delivers insider tips and non-boring advice on how to buy, sell, or rent a house or apartment. Additional questions welcomed to firstname.lastname@example.org. Today's topic: Sales and Rental Broker Liz Finlay of Nantucket's Great Point Properties answers reader questions about buying, selling and renting on the Cape and Islands.
Question: I'd be interested to know what are the financing options for buying a B&B or guest house on the Cape. If you plan to live in it, is it just like a residential mortgage or are the rates, downpayments, etc. higher?
Liz: If you will be operating the B&B or guesthouse as a business and it is not just your primary residence, then it is considered a commercial mortgage and it may be subject to a higher down payment and rates. This is a great question for your mortgage broker but the short answer is: a conventional residential 30 year fixed mortgage is currently around 3.5% with 20% down; a commercial mortgage can be similar in rates and percentages down, some small business loans will do a rate in the high 3% and low 4%, but commercial loans have shorter terms; for example 15 or 20 years.
Question: What are your thoughts on the most important things for a seller to do to get a house ready? Is it better to spend money on a stager or a storage unit?
Liz: When a prospective buyer enters your house, you want them to be able to easily envision themselves in your house. This means, get rid of the clutter. Depersonalize as much as possible. That kid height chart you have along your door? Take it down. I don't think it's necessary to hire a stager in most instances as long as you can remove the clutter and organize the house well. Having them feel like your house is ready for them also means trying not to have a long punch/repair list. In other words, if you know you need to fix a few things around the house, do it and do it before you list it. It will all probably come up in the home inspection anyway. Add some curb appeal if need be - a first impression is everything. Do a yard clean up. If you have a deck, porch or patio, make it as inviting as you can so buyers can picture themselves having their morning cup of coffee there. A new coat of paint can make a huge difference in making a house feel light and bright and new. Stick with neutrals. How many times have you watched HGTV's "House Hunters" and heard the buyers say they don't like a certain paint color? That color is usually a dark or bright color. Play it safe and use neutrals which will more easily match their furnishings. The more you can de-clutter and depersonalize so buyers can envision themselves living in your house, the better. And ask your broker to give your their honest opinion, tell them not to be gentle. Many brokers are afraid of offending their clients and will not speak totally freely (it's is kind of like a newly dating couple) and are afraid to tell the clients that their collection of dolls is creepy. Let your broker know you are committed to the sale of your home and ask them to be honest. An open and honest dialogue is imperative and what better place to start that dialogue than talking about getting rid of those creepy dolls.
Question: Are summer rental prices negotiable? Do they decline like airline tickets closer to the season?
Liz: Summer rental rates are not typically negotiable on Nantucket. A few years back, we did see more negotiations because of the economy but owners are now firm on their asking price, especially if they have been fully booked the past couple of summers. The best suggestion I have for people looking to vacation on Nantucket is to start early. There is more to choose from in the fall than there is in the spring. We are very busy booking leases in the fall and see a slow down during the holiday season and then in January it gets busy again. The car ferry tickets go on sale in January and most people like to have their house situated by then to be able to buy their ferry tickets. That's not to say we don't book houses in May for July because that happens as well. There is just much less to choose from so you may end up having to change your criteria and consider other areas of the island or other dates. People love to vacation on Nantucket and we love helping them find the perfect home, but do yourself a favor and give us plenty of time so we can find you the perfect house.
Question: What Nantucket neighborhoods do you recommend for non-millionaire/billionaire summer renters?
Liz: We have summer rentals in pretty much every area of the island and in every price point. A very general rule of thumb is $1,500 per bedroom per week, depending on location, beach proximity and decor. The closer you are to the water, the higher the rental rate. We have one bedroom cottages in the $1,500 per week range and have oceanfront estates for $50,000 per week. With over 750 rental houses in the Great Point Properties' rental inventory, I like to think that we have a home for everyone. And we get visitors from all walks of life. Again, the earlier you start planning your vacation to the island, the better. We have many tenants who repeat to the same houses year after year who book their leases while they are on island for their next summer vacation.
Question: Are single-family homes in seasonal locations, especially Martha's Vineyard and Nantucket, good investment properties? Is it common for summer rentals to sit empty due to lack of demand?
Liz: In my experience on Nantucket, I have found that single family homes make great investment properties. In fact, often our tenants become buyers. After renting homes on Nantucket, they decide that they want to invest on the island, spend their vacation in their home and open it up to rentals otherwise. When a buyer is looking for a vacation rental home, we review the most commonly requested areas, number of bedrooms, and the parameters of our high season. Our typical summer rental season begins at the end of June and ends with Labor Day. You can pretty much bank on renting July and August; June and September are shoulder months and because most of our visitors are families, the school schedule impacts rentals making June and September less likely to rent. If a house is sitting empty in the summer, the owners likely need to rethink their asking price and/or decor. When you list your home for rent with us, we visit the home and suggest a rental rate. Even if the home is not new to the rental market, owners are often looking for feedback on pricing. A thorough spring cleaning is vitally important to a successful rental season as is having the home well-appointed and well-maintained. We have a list of suggested minimum furnishings to help new owners in furnishing and stocking their homes. While I grew up going to the Vineyard, I live and work on Nantucket but imagine the same holds true for the Vineyard as well.
Question: If you buy in a place like Nantucket and plan to only use the property during the shoulder seasons while renting it during the summer, does the bank consider a percentage of the rental income for the mortgage like they do with a year-round income property?
Liz: If you purchase your Nantucket home as a second home or investment property and you plan to rent your home, then the bank can take the rent into consideration as income if you need the rental income to qualify for the loan. There would be a higher downpayment (25% according to one mortgage broker I spoke with) and an appraisal would need to be done in order to set rental rates. The majority of rental homes on Nantucket are summer vacation rental homes so they do sit empty in the off season or have owner use. We have about 12,000 people who live here year around and that number swells to 70,000 in the summer.
Question: Can you explain the typical timeline for buying a house? What's the time between offer, purchase and sales, in contract, under agreement, etc. and what are those things exactly?
Liz: On Nantucket things happen a little differently than many parts of America, when a buyer decides to purchase a house their agent drafts an offer to purchase. In most cases, the offer is good for 24 hours but depending on the level of activity and the strength of the offer sometimes less. Upon acceptance, the offer is fully executed by both buyer and seller and the seller's attorney drafts and circulates a purchase and sale agreement that is usually signed within two weeks of an accepted offer. When the purchase and sale agrement is signed by both parties, the property is then under agreement or under contract. They mean the same thing. At this point, there are often no contingencies remaining and all that is left to do is the closing which is normally at least a couple of months out unless it's a cash offer. Cash offers can close faster than those with financing contingencies. If financing comes into play, we see many offers with a 30 day contingency period from acceptance of the offer, but in reality the banks often need every bit of 45 days to get financing in place. Once the property is on record at the registry of deeds, the sale is complete and the buyer is the proud new owner of their Nantucket dream home.