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Beach House… A worthy investment?

In July of 2005 my husband and I purchased a very cute, little, yellow, beach house in NC for $620,000. We bought the house because we love it. And if all goes well we’ll spend a good deal of our retirement there (we’re only in our 20s so that’s a long way off). If you are thinking of buying and renting property in a resort town there are a couple of things to keep in mind.

You will never make enough money in rental income to pay off the mortgage. At best, our house will rent 3 to 3 1/2 months out of the year. Primarily June, July, and August and perhaps a couple of weeks in either late May or early September. Our house has five bedrooms and sleeps 12 people, but at the peak of the season it only rents for around $2300 a week. Our total rental income is between $15,000 and $16,000 a year.

When budgeting for a second home you need to keep in mind all of the expenses that go with it. We rent our home through a rental agency that charges a 15% commission rate. They also charge a minimal fee for advertising your property in their rental books and online. Add in a second set of utility bills, renters like to take long showers, leave the lights and fans on both inside and outside the house, run the air conditioner to maximum capacity, etc. You’ll be paying homeowners insurance, (possibly flood insurance), plus you’ll need an umbrella policy if your property has a swimming pool. Don’t forget about property taxes and homeowners association fees.

I read a lot of information on purchasing coastal homes before buying our “investment” property. It seems a fair number of people buy beach front homes to help fund their children’s college education. I came across an interview of a number of owners who thought it was a great idea to buy a home, where their children could play while they were young, and then sell it once they got old enough for college. But most people become attached to their vacation homes and decide not to sell them. I haven’t owned our place for even a year and already I have so many great memories that I can’t imagine parting with it. In fact, the family we bought the home from, were the original owners, and had used it as a vacation home for 28 years.

If you plan on holding onto a beach front property for a number of years, and think you’ll have the heart to sell it, then a beach home might be a worthy investment for you. Personally, I hope we never have to sell ours.

david

Monday 3rd of April 2006

If you can recall any specfic books or articles that were particularly useful, my wife and I are contemplating a similar purchase in the next 1-2 years.

Thanks!