Buying a home on the beach can be an excellent return on investment, providing a reliable income stream and access to a charming vacation spot. On average, beach properties attract higher rental income than those that don't offer beach services or something similar. Before investing in a vacation home, it's important to consider your lifestyle and whether you want your property to serve as a rental when it's not there. 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. 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. 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. 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. 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. Securing a beachfront property could also be more expensive. There's nothing worse than promising your guests a beach vacation when your beach rental is a 30-minute drive from the sea.
Owning a vacation home on the beach gives you access to an enviable lifestyle that is not only fun, but can be good for you. 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. Owning a beach home can be more complicated than owning an indoor home, financing is more expensive, the tax burden can be higher, and flood insurance and property management add to your financial obligations.
Is Investing in Beach House Worth It?What's more, is it worth investing in a beach house for income as a vacation rental property? 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. Let's look at what it takes to invest in a vacation rental in a beach house that successfully generates a stable rental income. 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 wise investment to buy a beach home. If you commit to the beach experience, your beach rentals can't be far from the real beach. 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 higher potential for property income.