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Paul Lake no frame sm 17Owning lakeshore property can be a wonderful investment, but selecting and buying the right place can come with challenges, even if you already own a home in town. First-time buyers and those who have purchased a home before could be in for some surprises, if they fail to consider items unique to the purchase of shoreline property.

Full cost of owning a lake home.  The beauty and tranquility of lakeshore property can obscure the total cost of owning a lake place.  In addition to utilities, maintenance costs, and a possible mortgage payment, there is the cost of outfitting a lake home, insurance, real estate property taxes, and travel costs to and from the lake.  Owners of lake property often pay taxes for services as if they used the services for the entire year, when, in fact, they may use the services only four or five months.

Your lifestyle: What do you want to do at the lake: fish, boat, swim, or retire with lots of privacy, quiet and few neighbors? If swimming or fishing are important, swim in the lake or fish in it before you make a purchase. If the lake home will be a weekend and vacation retreat, how far are you willing to drive to reach the property?  Space for extended family and the ability to make the property accessible to the disabled may be most important.  Answering these questions will help you purchase a lake home that fits your lifestyle.

Classification of the property.  Will the lake home be used year round, seasonally, or for recreation?  If the lake home will be your main 12-month residence, you may be able to establish a Homestead classification for the property, which could result in lower property taxes.   However, even with the homestead tax advantage, lake home property taxes can be considerably higher than the taxes you pay on a home in town.

Consider a market analysis. A visit to the county recorders office is a good starting point to research the tax-assessed value of the property.  An even better method of determining the property value is a market analysis.  You’ll want to select a firm that has experience with lakeshore property.  An inspection by a certified house inspector may also be warranted.

Use and condition of the property.  If you are looking at a bare lakeshore lot, the zoning and use restrictions of the property are important to understand.  The lot must fit what you want to build.  Many lakes have minimum lot-size requirements for development.  Zoning restrictions could prohibit the size of the lake home you want to build.  Determine where the lot lines are located.

Lake property should have a survey that is reviewed for accuracy in its legal description.  The initial starting point of the survey should be a permanent marker established at a known point of reference, such as a survey marker.  The legal description should not start at the shoreline and encompass  the property because the shoreline is not considered permanent (it can erode) and could results in a vague legal description that could require a quiet title action to clear any cloud on the title to the property.

Even when buying an existing lake home, be aware of local regulations and the condition of the property. Typically, there are regulations regarding the use of wells and water systems, septic systems, drain fields, holding tanks or mound systems.  Some counties regulate the amount of impervious surface on a lake lot.

If you plan to tear down an old cabin on a lake lot to make way for a new home, consult the county zoning or land and resource use office. Some regulations require a builder to keep a portion of the cabin’s original construction in a new home.  Whether you are planning improvements immediately or several years after retirement, a visit with the government entity that regulates the property will eliminate any disappointments after the purchase.

Review the stability of the ground and the shoreline. Foundations set in clay can cause problems down the road. Property can be located in a flood zone, which requires the purchase of flood insurance, if you finance the purchase. Lake property that is subject to erosion from rising water levels and heavy wave action can devalue the investment.  Expensive riprap rock can solve an eroding shoreline, but often at the expense of losing a sandy beach for swimming.

A state’s Department of Natural Resources typically regulates the preservation of shorelines. There are often strict regulations regarding the alteration of a shoreline.  The restrictions can include setbacks for buildings and adding and removing sand, rock and vegetation.  Find out what can be done to a property and what permits are needed to make changes before you make a purchase offer.

Without adequate research, the property could cost more than you are eligible or willing to finance. Even worse, you could end up not owning the property at all!  One of the issues that are more prevalent with lake properties is the problem of the chain of title.  This can be true with property adjacent to government land, Native American tribal land, or land in which ownership may be disputed due to treaty issues.  Obtain a title opinion from a reputable real estate attorney to protect you from potential problems with ownership rights.  The small investment you make in an attorney’s opinion, before you buy or build a lake home, can end up saving you thousands of dollars and protect your investment.

Selecting a lake home should include a site inspection. Photographs and Internet pictures are no substitute for getting out of a vehicle and walking the property. Talk with the neighbors.  Ask what has been the history of the property.

Financing the property. A three-season lake home or a cabin built with lower-quality construction can limit your financing options. Homes that are not year-round habitats or permanently attached to the ground typically fail to qualify for the more attractive interest rates and smaller down payment requirements of the fixed-rate, secondary-market financing.  Ask an American Federal Personal Banker about in-house financing for seasonal homes.

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Photo by Alice Beauchman