Is a Beach House a Good Investment?
It sounds like a dream: a charming house along the shores of your favorite beach, ready and waiting for you when you need to escape from the humdrum of your landlocked life. Or maybe a cabin in the woods is more your style, a place you can set as headquarters while you ski in the winter and hike or boat in the summer. And when you aren’t relaxing in the sunshine or adventuring in the outdoors, your property will earn you great cabin or beach house rental income.
But is a beach house a good investment? Is a cabin a good investment? Vacation and beach rental property investment isn’t as straightforward as it seems. Investing in a house along the beach or a cabin in the woods, with the intent to rent it and manage it from afar, can be lucrative—if you do it smartly. This guide will explore how to answer the question, “Is a beach rental a good investment?” and give potential property owners some tools to make the most of an investment beach or cabin property.
|You are reading an article from the Money & Investment section of our Ultimate Vacation Rental Business Guide.
See the other articles in this section below:
• Vacation Rental Investment Guide
• Is a Beach House a Good Investment?
• How to Make Money on Vacation Rental Property
How Much Is a Beach House Rental?
There are a number of expenses to consider when you decide to purchase and rent out a beach house rental property. In some cases, these expenses can be outweighed by earnings from rental income. For example, someone who owns a beach house on the coast in Florida may be able to rent it out at premium rates during the colder months from October to March, when many people are looking for a break from the cold and snow, and make enough to cover expenses for the rest of the year. This is definitely a best case scenario. When considering, “are beach rentals a good investment?” factor in the following costs.
Down Payment and Mortgage
The cost of the investment property, plus the monthly mortgage fees, make up a significant—but not the only—portion of the costs associated with owning a beach rental property investment. If you and your partner have good incomes and credit ratings, you may be able to get a good loan and favorable interest rates that can save you some money. Before committing to owning a vacation rental property, it’s important to understand the costs involved.
Homeowner’s insurance on a beach house is going to be substantially more expensive than insurance on your current home. Flood insurance is often mandatory in beach towns, especially on the East Coast, which has seen plenty of hurricane damage in recent years. For example, a yearly premium of $10,000 for flood insurance on beach homes isn’t uncommon in Florida, but you might find better prices in California or states such as South Carolina.
Along with mortgage and insurance, there are utility bills to consider when looking at the costs of owning a vacation rental home. Electricity, gas, cable, internet, and water are all bills you are used to paying at home, and they will follow you to your vacation home. You can request that renters be respectful of their water and energy use, but you can’t control their behavior and may end up with unexpectedly high bills when your guests aren’t careful.
With high property values come high real estate taxes. This is the case with beachside properties. On the upside, your vacation rental property can be considered a business—so a lot of the repairs, upkeep, and expenses involved in running the rental investment can be written off on your taxes as business expenses.
Repairs and Maintenance
Expect to pay for regular updates and repairs. To keep your home attractive and competitive among other beach or cabin rental properties, you need to have inviting decor, modern amenities, and everything in general good repair. If your property is older, you might face repairs more often and may be due for a renovation. Plan to spend about $2,000 to $5,000 per year on repairs and maintenance.
Where Should I Invest in Property?
There are a number of factors that go into deciding where you should purchase your investment property. Ideally, you’ll want your cabin or beach rental property investment to be located at or near a popular tourist destination—and a destination you and your family will love visiting regularly for years to come.
Keep in mind that properties in great locations, such as near the beach in a popular vacation area, will be substantially more expensive than properties located more inland or in less popular areas. Property in California tends to be more expensive than East Coast beach homes, while property taxes in Florida and other East Coast states can be much higher than on the West Coast. Great locations for vacation homes include Florida, South Carolina, Vermont, Alabama, California, and Montana.
Should I Invest in Property Now?
Is now the time to invest in property to rent as a vacation home? To get a solid “yes” or “no” to this question, you’ll need to get the advice of an experienced real estate agent in the market you are considering. Take a look at interest rates, how much rental properties are going for in the area, and property taxes. These may fluctuate throughout the year.
Another thing to consider is your own stage in life. Do you have savings set aside apart from what you would be investing in the property? Do you have a solid retirement fund? Do you anticipate any major expenses, such as repairs to your primary house or college tuition for your children? Make sure your finances are in order and that you have a solid savings account before investing in a vacation property. You might consider consulting with a financial advisor to fully understand the risks and benefits of taking on this expense at this time.
Beyond your financial situation, your personal and family stage of life is important to consider also. If you have young children and are still building your career, you might reconsider taking on the extra risk of a second home. On the other hand, it will be a joy to see your children, and later, grandchildren enjoy the property and become involved in managing it.
Is a Beach House a Good Investment?
Ultimately, the answer to this question depends on you and your own personal and financial situation. It is possible to make money off a vacation rental property if you manage it well and are aware of the expenses. Sometimes, the simple enjoyment of using the property yourself and the memories you and your family build there will make the investment worth every penny.
How Can I Get the Most Out of My Beach Rental Property Investment?
To maximize your cabin or beach house rental income, you need to manage the property well. That means marketing the property, listing the property, communicating well with guests, keeping it clean, and pricing it right. This is a lot for most property owners to deal with, especially from afar, living their own lives. But it is essential to getting the most out of your investment.
That’s where Grand Welcome comes in. We offer full-service property management, from listing and booking to hospitality services for your guests to dynamic pricing that will truly maximize your revenue. We know you’ll love owning a beautiful cabin or beach vacation rental property. You focus on making memories when you’re there, and the rest of the year, we’ll make sure your investment works for you.
If you are more interested in opening your own vacation rental management franchise with a small investment, contact Grand Welcome Franchise today to receive the Free Franchise Information Kit, and start earning revenue with our professional and ongoing support and training for you.