Rising sea levels, high insurance premiums… Are beach houses still profitable investments? Spoiler alert: yes, they are! …
Hearing the term ‘real estate’ most people think of suburbs or city condos, but a totally different form of real estate is coming into the limelight in 2021…
That’s the beach houses!
Did you know, there are about 9 million vacation houses (which include beach houses) in the US alone?
And just last year there was 44% growth in the sales of vacation homes around the US? Higher sales mean higher prices and more money for homeowners.
So far so good, beach houses seem like a good investment!
But, investing in real estate can be intimidating when thousands of your hard-earned dollars are at stake, and the weather down south is getting unpredictable…
How can you be sure that investing in a beach house is the right decision for you?
Read below the pros and cons of a beach house investment and decide for yourself whether you’d like to go for it or not…
The Pros of Investing in a Beach House
1) You Can Make Money, Lots of Money
There’s high potential for you to bag tons of money from your beach house investment because according to Statista, the revenue is going to grow by 10.1% PER YEAR until 2025!
Also, vacation houses are easy to rent on a short-term basis, which produces as much as 300% more rental income than traditional, long-term real estate (especially during the peak tourism months!).
This rental income will easily pay your mortgage and other property-related expenses, and even produce cash flow if your beach house is in a desirable tourist location.
So, yeah, there’s money in it.
*Tip: Just make sure you’re allowed to do short-term rentals with your property, some cities in the US put restrictions on vacation rentals and Airbnb’s!
2) Tax Benefits Are Available
The great news is that lots of costs related to your beach house will actually be tax-deductible if it’s considered a vacation rental property business.
Meaning, you can write off your expenses like repairs, marketing, internet, and heating bills, insurance and management costs against your taxes…
Isn’t that cool?
*But wait… Many states charge extra taxes on beach houses too. So, check with your real estate agent before assuming you can save on your taxes.
3) Property Value Appreciation
In addition to rental income, your property appreciation is what will determine whether your beach house is a good investment.
Usually, real estate prices rise with inflation, and this means your beach house will be appreciating in value WITHOUT your doing anything about it!
Learn more: Making Money in Real Estate with Appreciation
Or, you can do some simple extra repairs and renovations to actively boost your home’s value.
Either way, year after year you’ll be getting richer and richer whether you rent your beach house or not…
4) Paying for the Long-term
But that’s just the start!
Imagine the revenues 10, 20, 30 years ahead… you can rely on a beach house to pay you for a long time.
Because people will always be going on vacations, even 50 years from now. And they’ll be paying good money to do it, too.
5) A Personal Paradise at Your Disposal
The last benefit is that once you’ve bought it, you can always have a wonderful time with your friends and family at your beach house.
There’ll be no need for you to rent a hotel room the next time you go on vacation provided you go to the same place where your beach house is located, because, you know, you can’t take your beach house with you everywhere.. LOL!
But even if you want to travel to a new destination, you can still use the revenue generated by your beach house to pay for your vacation abroad…
The Cons of Owning a Beach House Investment
1) Dependency on the Season
The one bitter truth about beach houses that you must accept…
Is that beaches are not full of vacationers year-round. Most people will visit beaches only in the summers so your property will not be in demand during the freezing winters.
But sadly, you’ll still be paying maintenance and mortgage.
This is why making investment calculations for cash flow and expenses is so important before making your buying decision!
2) Location is Everything
Location is crucial for getting a positive cash flow. If your beach house is miles from civilization – don’t expect a lot of vacationers to pay big bucks to stay there.
According to an analysis by Mashvisor, the following markets are predicted to be the best vacation rental markets of 2021 and into the future:
- Berkeley, New Jersey
- Englewood, Colorado
- Levittown, Pennsylvania
- Covington, Georgia
- Abilene, Texas
3) Global Warming Means Flood and Disaster Risk
As per the National Oceanic and Atmospheric Administration (NOAA), sea levels relative to average are rising.
What does it mean for you, as a beach house owner?
It means that your property could eventually be underwater!
The devastating effects of hurricanes can also make your investment nothing but a white elephant. So take precautions now to mitigate the damage…
And look at NOAA sea-level projections to make sure your beach won’t be one of the worst-hit by the climate crisis!
4) Be Prepared to Pay Costly Insurance
Houses close to the ocean bear extra damage due to the salty sea breezes that cause erosion to the walls and ceilings like anything.
So, be ready to pay additional home insurance.
Plus, you may also be required to take flood insurance for your beach house, in which case, wave your profits goodbye… for now.
As per the New York Times, the cost of insuring water-front homes is set to spike following recent hurricanes and floods across the Southern US.
The good news is that these costs will likely hurt temporarily.
Since every home owner’s expenses are increasing at the same time, they will likely translate into higher rental prices, which will bring in enough additional revenue to bring profits back to their baseline.
5) You Can Expect to Pay Higher Maintenance Fees
One category of costs that get tagged along with vacation houses is the maintenance costs.
Because you’ll be renting your beach house you’ll want to keep it in good shape for top dollar rentals…
Plus pay property management costs if you are not living in the area, which can be as high as 25% of revenue for short-term rentals!
A beach house is also likely to have all sorts of fun stuff to attract guests, like jet skis and motorboats which will add to your expenses.
The Bottom Line!
So the bottom line is that a beach house investment is still a great choice to bring you lots of financial gains, even in 2021!
But there are some downsides too…
So if you plan to invest in a beach home, talk with an expert first and analyze the pros and cons discussed above. If you are looking for advice, our real estate experts are always available to answer your emails at email@example.com, or your calls at +1 (844) 424-AQRE (2773).