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Pros And Cons Of Buying A Beach Home
Dreaming of buying a home at the beach? Considering the Pros and Cons of such a purchase is the first step. Most everyone would agree about the Pros of owning a beach home ... the beach, of course … the views … refuge from the city … laid-back atmosphere … resort amenities for your use … creating memories with family and friends.
All the intangibles and tangibles that make beach vacations so relaxing extend to owning a piece of the beach for yourself. If your beach home will be your permanent residence, you could feel like you are on vacation every day. And if you intend to rent out your new beachfront digs as part of an investment plan, you probably won’t have too much difficulty finding tenants, charging the rents you need and recouping your investment.
Here in Southern Maryland, we are fortunate to be virtually surrounded by water. At any given moment, there are tons of beach houses available for sale from affordabel "fixer-uppers" to luxurious move-in read properties. See the list of homes available here.Bookmark the search results page - it is updated constantly. Or better yet, sign up for alerts on our website to hear about waterfront houses as soon as they come on the market!
The Pros of Owning a Home at the Beach:
1. Long-Term Profits - While all assets fluctuate in value in the short term, vacation properties are more likely to retain their value and appreciate simply because they are located in popular areas with a geographically limited supply. There is a finite shoreline on which houses can be built. But real estate, like stocks, bonds and other investments, has always fluctuated in value and will likely continue to do so in the future. Therefore, be aware that there is no guarantee that a second home will sell for a higher price in the future.
2. Tax Deductions - Many people who own second homes prefer to keep them unoccupied when not being used for personal enjoyment. If you charge rent for occupancy for no more than two weeks per year, the interest on the mortgage and the property taxes are fully deductible from your gross income. In other words, for tax purposes, you reap the same benefits you do from the mortgage on your primary residence.
3. Rental Income - If you decide to rent your home, but personally use the property as well, you’ll need to determine whether you’re eligible to deduct operating expenses. To determine this, add up the days you rented the property. If you occupied the property fewer than 10% of the days you rented it, or for less than two weeks – whichever is greater – you can deduct all of the operating expenses of the home including interest, utilities, cleaning fees, lawn maintenance, and management fees. Rental fees vary according to seasons and the popularity of the resort location. For most resorts, peak season weekly rental fees are usually equal to or greater than the property’s monthly mortgage payment, allowing you to break even with an annual occupancy around 30% from a cash flow viewpoint.
4. Familiarity - Returning to the same place time after time can be comforting as you become familiar and comfortable with the location. It allows you the opportunity to expand long-term friendships with residents – you can become part of the social fabric.
5. Convenience - Never pack for vacation again. The ability to conveniently store items that are used exclusively at the beach house simplifies travel and packing.
6. Retirement Head Start - Though we may love the places where we work and live, every place has its drawbacks. A common goal of retirement is to have a place of retreat for the times of the year we dislike the most at our main residence. Locating and buying a second home prior to retirement enables you to experience the benefits of a refuge before actual retirement, and a time to correct and amend your plans if the reality is different than the dream.
7. Location for Gatherings - Places stir memories of people, relationships, and good times. The intangible benefit of owning and passing property from generation to generation – especially a home that has been and will continue to be the site of many happy gatherings – is incalculable.
The Cons of Owning a Beach House:
1. Initial Purchase Costs - Most people have higher expectations for a property that they intend to own, rather than to rent. These expectations can translate into high prices. In popular areas where space is limited, the house may be priced higher than the cost of your primary home. In addition, new homeowners typically incur the costs of furnishing the new purchase with everything from furniture to linen and dishes, costs that can easily exceed 25% to 33% of the purchase price.
2. High-Cost Mortgages - The percentage of down payment and the interest rate on any mortgage is likely to be higher for a vacation property. Depending upon the location, condition, and market value of the property (as well as your own financial status and credit history), a typical 15- to 30-year mortgage for a non-owner-occupied property usually requires a 20% to 30% down payment of the sale price (the higher the down payment, the easier to find a willing lender).
3. Home Maintenance - As the homeowner or a member of a homeowner group, you are responsible for all home maintenance. If your beach home is a condominium, maintenance of the building itself should be handled by management. But in some instances, you may spend your entire visit working on the property, which is surely not what you expected when you dreamed of ownership.
There’s beachfront, and then there’s near the beach—you will need to decide which best serves your needs. The former will make it easier to access the beach, which is, after all, the main asset of the home. However, beachfront homes may be more prone to storm damage and flooding, and they are usually more expensive.
If a home is located even just a half-block away from the surf, the price difference from one on the beach could be huge; but it may still offer views, salt air, and a quick, easy walk to the sand. A residence a short distance from the beach can still offer solid amenities, more protection from the elements, and more protection for your bank account.
Hire a Realtor! The assistance of a real estate agent is invaluable during your search for the vacation home of your dreams. A good agent can guide you through the purchase process, help you find mortgage financing, and may be able to manage the property when you’re away.
Robert is the co-founder and Broker at PAX Real Estate in Prince Frederick, Maryland. He brings with him over 30 years experience building successful companies as an entrepreneur and business owner. W....