It Takes Time and Money to Run a Successful Vacation Rental Business. Buying a beach rental is by no means a get-rich-quick investment. However, once you reach your pace, investing can be very lucrative. Before investing in a vacation home, take stock of what you are actually taking a vacation.
If you're living the double-income childless (DINK) life, then it might be easier for you to escape than if you had children, a dog, and errands you need to do on a regular basis. Fortunately, you can hire a property manager to at least take care of your vacation property while you're away. Even before you commit to buying your vacation property, ask yourself if you want your property to serve as a rental when it's not there. If your home is big enough for you and your family, then its rental appeal decreases considerably.
So, check with a local real estate agent and find out what type of property to invest in. However, keep in mind that the criteria for obtaining a loan for a rental property are more stringent than for obtaining a loan for a primary residence. This is because the lending institution is taking a higher risk by virtue of lending money to a property that is simply more likely to default than its primary property. Therefore, expect to make a larger down payment, need a higher credit score, and undergo a more thorough investigation of your past finances.
If you live near water, it's not a question of whether a big storm will occur, but rather when a big storm will occur. You'll need flood insurance, the cost of which will depend on where your home is located. This is something you should research before you even buy a home, because with sufficient expenses, your rental property can generate a negative income, and that is simply an unfeasible plan. There are certain benefits that the IRS makes it easier to use a vacation property as a rental property.
You just need to know some tax rules. If you want to use your vacation home as a rental property, you can only use it yourself for a limited number of days, while still being able to deduct expenses. You can use your rental property yourself for 14 days or 10% of the total number of days the property is rented at a fair rate. Therefore, if the property is rented for 200 days, you personally cannot use it for more than 20 days.
Don't deposit in your rental income that covers your mortgage in full. In addition to unforeseen events, you should also consider vacancies in your budget because there are likely times when you don't have tenants. When things get tough, difficult ones become difficult to rent, but a beachfront property isn't likely to be where people rent when they experience financial hardship. Instead, vacations decrease, so you may find yourself with a financial sink.
In which direction is the wind blowing and in which direction does your house look? You should know this because the answer to this question can determine how much damage your home suffers during a storm. You'll also want to know which path to take when the sun rises and sets, because you might find a home that has walls in both directions instead of balconies, depriving you of the views that inspired your purchase in the first place. With the stunning sea views and built-in beach activities, such as swimming or surfing, for guests to enjoy, the beach house will practically market itself, especially during the peak season in summer. It's best for the person inspecting your home to be an expert on coastal properties, because living close to the beach has its own unique set of considerations.
Similarly, while a beach property thrives in the summer months, if there isn't much more to do in beach towns, your rental income will suffer during the colder seasons, when guests aren't as keen on going to the beach. These beach towns are the ideal place to start investing in beach rentals because they will have a higher potential for property income. The popular vacation destination Gulf Shores, Alabama, is at number one on this year's list of profitable beach markets. While the main purpose of a vacation rental investment is to rent your home to guests, the beach house will remain your property for your personal use when you want your own getaway.
Homeowners insurance on a beach home is likely to be several times more expensive than coverage for a main home. If you're considering buying a beach house anywhere in particular, it's best to do a little more research on local vacation rental laws and regulations before making a big investment in vacation rental properties only to get caught up in government bureaucracy. If you are willing to work to find a profitable location and spend time finding a property with great income potential and are willing to use tools such as vacation rental software to help boost your property management, it would be a wise investment to buy a beach home. On average, beach properties attract higher rental income than those that don't offer beach services or something similar.
It will be even easier to book a beach vacation if you already have a beach vacation home, which you can simply lock in your availability calendars and enjoy with friends and family. Buying a home on the beach can bring an excellent return on investment, a reliable income stream, and access to a charming vacation spot. Vacasa's most recent Vacation Buyer Report shows 42% of buyers are looking to buy a vacation home in a beach destination. You won't need to rent a hotel room the next time you go on vacation, as long as you go to the same place where your beach house is located, because, you know, you can't take your beach house everywhere.