Is Lake Athens calling your name, but you are unsure how to finance a place you will enjoy and also host as a short-term rental? You are not alone. Many buyers wrestle with whether a “second home” loan or an “investment” loan is the better path. In this guide, you will learn how lenders view each option, what the City of Athens requires for STRs, and how to line up financing that fits your plan. Let’s dive in.
Second home vs investment: key differences
A second home is a one‑unit property you occupy part of the year and do not treat primarily as a rental. Agency rules expect owner use and limit how rental income is treated. See the formal definitions in the Fannie Mae occupancy guide.
An investment property is owned but not occupied by you, and it is used to generate rental income. Lenders price these loans higher because risk is higher. Your intended use drives how a lender will classify the home and what terms you can get.
How your plan changes your loan
- Second‑home conventional loans: usually lower rates and fees than investor loans, and sometimes lower down payments, but you must intend to occupy the property yourself. Many lenders will not let you use projected STR income to qualify as a second home. Guidance comes from Fannie Mae’s occupancy rules.
- Investment property loans: expect higher down payments and higher rates. Typical conventional investor down payments often start around 15% to 25% depending on the lender and your profile, as outlined by industry summaries like this overview of investor down payments.
When a DSCR loan fits
Debt Service Coverage Ratio (DSCR) and other non‑agency products let lenders qualify you based on the property’s cash flow instead of your personal income. These are common for STRs.
- Typical terms include 20% to 30% down, higher rates than primary‑home loans, and a required DSCR threshold, often 1.0 to 1.25. Lenders may accept platform payout statements or market projections. See a practical overview of how DSCR lenders handle STRs here.
- Some lenders use a portion of gross STR revenue for DSCR calculations, while others fall back to an appraiser’s market rent schedule. Expect lender‑by‑lender differences, as explained in this DSCR guide.
Athens STR rules you must plan for
If your property is inside the Athens city limits, the City adopted Ordinance No. 2024‑O‑159 on October 14, 2024. The Short‑Term Rental Info Guide highlights:
- STR permit and inspection required, with a $200 application fee and annual renewal.
- Registration to collect and remit city hotel occupancy tax.
- Liability insurance and a designated local responsible party for complaints.
- Occupancy limits, plus compliance with noise, parking, and trash rules. Violations can lead to fines and permit revocation.
Review the city’s requirements in the Short‑Term Rental Information Guide. Build permit timing, inspection items, and insurance into your closing and launch plans.
Outside city limits on Lake Athens, confirm Henderson County requirements and any HOA or deed restrictions before you buy. An HOA restriction can prevent STR operation even if the city allows it.
Underwriting realities for STRs
Lenders will dig into income, reserves, valuation, and your broader portfolio.
- Income documentation: Agency second‑home loans rely on your stable personal income. If the property is treated as an investment, agencies often look for rental history or an appraiser’s market rent schedule rather than new STR projections. See Fannie Mae’s occupancy guidance.
- Credit, cash, and reserves: Strong credit helps. Many lenders expect at least around 10% down on second homes with solid reserves. Investor and DSCR loans commonly require 20% to 30% down and 6 to 12 months of reserves. For rate context and credit expectations on second homes, see this overview.
- Appraisal nuances: Some lenders accept STR‑aware comps or a market rent schedule. Others base rents on long‑term lease metrics, which may be more conservative for high‑revenue STRs, a dynamic noted in this DSCR appraisal discussion.
- Multiple properties: If you already have several mortgages, agency rules add layers and limits. Review Fannie guidance on multiple financed properties.
Taxes, insurance, and flood considerations
- Federal taxes: The IRS treats homes with mixed personal and rental use under Publication 527 and Section 280A. The “14‑day or 10%” rule affects deductions and depreciation. Start with IRS Publication 527 and talk with a tax professional about your plan.
- Hotel occupancy tax: Inside Athens, build city HOT collection and remittance into your pricing and bookkeeping as part of the permit process. The city will direct you on setup.
- STR insurance: Standard homeowner policies often exclude business activity. The city and many lenders require liability coverage suitable for STR operations. Factor higher premiums into your numbers.
- Flood risk: Lakefront homes may sit in FEMA flood zones. Flood insurance is required on federally backed loans when a home is in a Special Flood Hazard Area. Check the property’s FEMA status and discuss premiums with your insurer. This overview explains why flood zone verification matters for financing and insurance decisions here.
Your step‑by‑step plan
- Define your use. Will you occupy the home part‑time with only occasional hosting, or run it primarily as an STR? Your answer determines second‑home versus investment classification. See Fannie Mae’s definitions.
- Confirm legality. If inside Athens, plan for the permit, inspection, HOT registration, insurance, and a local contact as outlined in the city STR guide. If outside city limits, verify county and HOA rules.
- Get lender quotes. Ask whether the lender will classify your plan as a second home or investment, if they accept STR income, what documents they need, and whether they offer DSCR options. Compare second‑home, investor, and DSCR paths using an STR‑savvy lender. A practical DSCR overview is available here.
- Gather documents. Be ready with credit and income docs, reserves, any prior STR statements, projections, HOA rules, and insurance quotes.
- Model cash flow. Build conservative, baseline, and peak scenarios. Include HOT, platform fees, management costs if used, higher insurance, repairs, seasonality, and 6 to 12 months of reserves if you plan an STR‑focused loan.
Common Lake Athens scenarios
Occasional host second home
- You plan to enjoy the home much of the year and host a few weekends. You pursue a conventional second‑home loan, document strong personal income, and keep rental activity limited. You still follow Athens permit and HOT rules if you advertise inside city limits.
Absentee STR investor
- You plan steady Airbnb or VRBO bookings. Most lenders will treat this as an investment. You compare conventional investor loans and DSCR options, prepare 20% to 30% down, and assemble proof of STR income or reliable projections. You set up the city permit, HOT, STR insurance, and local contact before launch.
Ready to find the right lake home and a plan that fits your goals? Let’s talk about neighborhoods, water depth, boathouse setups, and the numbers that matter to you. Connect with the Debbie French Real Estate Group for local guidance and a clear path forward.
FAQs
What is the difference between a second‑home and an investment loan for a Lake Athens STR?
- A second‑home loan expects owner occupancy and usually offers better pricing, while an investment loan treats the property as income‑producing with higher down payment and rates. Lender rules follow Fannie Mae’s occupancy definitions.
Do I need a short‑term rental permit inside Athens city limits?
- Yes. The city’s 2024 ordinance requires a permit, inspection, HOT registration, liability insurance, and a local contact, with fines for violations. See the Short‑Term Rental Information Guide.
Can I use Airbnb income to qualify for a loan on Lake Athens?
- Often not for second‑home loans. If treated as an investment, some lenders may use documented STR history or an appraiser’s rent schedule, while DSCR lenders may accept STR statements or projections.
How much down payment should I expect for an STR investment loan?
- Conventional investor loans often start around 15% to 25% down, and DSCR or non‑agency programs commonly require 20% to 30% down, with stronger reserves.
Do Lake Athens homes require flood insurance to get a mortgage?
- It depends on the FEMA flood zone. If the home sits in a Special Flood Hazard Area, flood insurance is required on federally backed loans. Always check the specific address and get quotes.
