Buying a home on the beach can be an excellent investment, providing a reliable income stream and 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 good investment. However, you'll need to factor in all costs, such as Homeowners Association charges.
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, consider what type of vacation you want. 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 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 factor in 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 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. Do you need additional bedrooms and 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 beachfront properties could also be more expensive.
To answer your questions we have done the research for you. We'll take a look at why these properties are booming in popularity, some of the pros and cons of owning beach rentals and what the average income is. Whether you're looking to buy a villa or condo, you'll be able to make an informed decision about whether investing in beach properties is right for you. If you've ever spent time enjoying the sea breeze in beach rentals then you know why demand for these properties is so high. The psychology behind why humans are attracted to beaches is simple: the environment is extremely relaxing; there are plenty of invigorating activities; and our bodies benefit from different elements like vitamin D that boosts serotonin or magnesium in ocean water that calms our nervous system. However loving beaches isn't enough reason to buy rental properties so let's get into why these investments are worth considering.
One advantage of having beach rentals is that they can be used for personal vacations too - just remember that if planning on depreciating the property and deducting expenses as business then personal use should be less than 10% of total days rented. Having quaint properties close to sea makes marketing much easier - who doesn't like seeing Instagram stories of people having picnics on beaches or viewing underwater photos? While professional photography is always recommended being close to ocean gives big advantage when promoting rentals. Renting properties close to beaches also tends to bring higher returns due to higher demand from tourists looking for short-term stays - this means higher occupancy rates and higher rental income. However there are some drawbacks too - one being that beachfront properties tend to be more expensive than other types of real estate investments due their location and potential appreciation value. In addition there are certain risks associated with owning beach rentals such as storms or hurricanes which could cause significant damage - this means having adequate insurance coverage and understanding local regulations regarding building codes. Finally before investing in beach rentals make sure that all costs associated with owning such properties are taken into account - from taxes and insurance premiums to maintenance costs and potential vacancies. Whether buying beachfront properties makes sense depends on individual circumstances - however understanding all aspects associated with such investments will help make an informed decision about whether investing in beach properties is right for you.
