Is it Worth Investing in a Beach House?

Buying a home on the beach can bring an excellent return on investment, reliable income stream and access to charming vacation spot.

Is it Worth Investing in a Beach House?

Buying a home on the beach can be an excellent way to get a return on investment, generate a reliable income stream, and have access to a charming vacation spot. Many beach house investors purchase properties that they later rent out during peak tourist hours. Real estate prices tend to rise over time, regardless of the type of home, so owning a condo or beach house is a smart investment. However, you'll need to factor in all costs, such as Homeowners Association fees, for example. You'll also need to realize that if you're just buying this property as an investment, you'll likely want to keep it for at least five years or more to really get your money's worth.

Before investing in a vacation home, take stock of what you are actually taking a vacation from. 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 pet, 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 fair rate.

Therefore, if the property is rented for 200 days, you personally cannot use it for more than 20 days. Don't forget to include vacancies in your budget when calculating your rental income because there are likely times when you don't have tenants. When things get tough financially, difficult ones become difficult to rent but beachfront properties aren't likely to be where people rent when they experience financial hardship. Instead, vacations decrease so you may find yourself with an income 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 storms.

You'll also want to know which path the sun takes when it rises and sets because you might find yourself with walls in both directions instead of balconies depriving you of the views that inspired your purchase in the first place. While beautiful coastlines can be plentiful, worthwhile beach vacation rentals aren't. An investment property on the beach can be an excellent source of income. Usually tourists pay more and pay premiums to stay on the beach in inland destinations. Buying a vacation rental in one of the popular beach towns or right on the beach could drive your rates up even higher during peak season. It's not uncommon for beach houses to be fully booked during peak season opening up opportunities to offset your mortgage and expenses.

Do you need additional bedrooms and additional living space as well as outdoor living space on your property? A beachfront home will appreciate faster but it's also more likely to suffer weather and storm-related damage. Securing a beachfront property could also be more expensive. Take into account these common considerations when looking for the best place to buy a beach house and exactly what type of beach house is right for you. Investing in a beach vacation property can provide opportunities not only to make more money but also create wonderful new memories. It's also wise to consider beach spots that attract visitors all year round and offer attractions such as fun boardwalks restaurants shopping and other family-friendly activities. It might be worth investing in an oceanfront property that opens directly onto the beach instead of one that is blocks away from it.

Beach life itself is expensive so be prepared and think about the additional costs associated with living there such as higher property taxes and beach home insurance costs which can be higher when closer to water in many areas (think major flood insurance).The bottom line when buying a beach house is that you will pay more than you would pay for the same house that isn't on the beach. 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 too. Mortgage interest rates on vacation properties are also higher than those on primary homes.

Lillian Collen
Lillian Collen

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