Fannie Mae just announced on 11/3/15 that rental income is now okay on second home properties. This is huge news for those looking to rent out their second homes on Airbnb, Homeaway or Rent Like a Champion without them being considered “investment properties”. You can now purchase property as a 2nd home instead of an investment property. Most lenders require 20%+ down payment on investment properties and charge interest rates about 1/2% higher than 2nd home rates. Today, (11/20/15) you could put 10% down and get an interest rate of 4% on a 30yr fixed mortgage with no monthly mortgage insurance.
Here is a excerpt directly out of FNMA’s guides:
|✓||Second Home Requirements|
|must be occupied by the borrower for some portion of the year|
|is restricted to one-unit dwellings|
|must be suitable for year-round occupancy|
|the borrower must have exclusive control over the property|
|must not be rental property or a timeshare arrangement1|
|cannot be subject to any agreements that give a management firm control over the occupancy of the property|
If the lender identifies rental income from the property, the loan is eligible for delivery as a second home as long as the income is not used for qualifying purposes, and all other requirements for second homes are met (including the occupancy requirement above).
In other words as long as you occupy your one-unit second home for some portion of the year and you don’t use the rental income to qualify you are not subject to the restrictions of investment properties. Here is a link to the update. Now has never been a better time to buy second homes and rent them out on vacation rental sites. You can earn cash flow and get to travel to them for free once a year.