As a real estate investor, you’re well aware of the potential in a beachfront property. It’s a valuable addition to any portfolio, a profitable piece of real estate that will yield high returns long after purchase. Before you buy, though, you should set aside some time to review both the positives and negatives of owning this type of rental property.
While the coastline is an attractive location for investment properties, you’ll need to account for certain factors you wouldn’t otherwise consider. You might feel comfortable managing an apartment complex or single-family townhouse, but you’re dealing with a different kind of real estate investment, and it demands a different approach.
If you’re preparing to buy an investment property near the sea, be sure to assess some of the points below. You’ll feel far more confident in your decision when you know what to expect, and moving forward, you’ll find that most of these issues aren’t hard to handle. They’re opportunities to learn more about vacation rental investments.
Flood Insurance
When you’re calculating your budget, you’ll have to account for flood insurance. It’s non-negotiable, mandatory for federally regulated lenders that mortgage properties in high-risk flooding areas. Even if you’re outside an area deemed high-risk, 20 percent of flood claims happen beyond these zones.
In other words, you’ll need flood insurance, whether you’re required to purchase it or not. Otherwise, you could lose your rental property investment and belongings, having to pay for repairs and replacements out of pocket. While flood insurance is somewhat expensive, you’ll find it’s well worth the cost after a heavy storm.
Expensive Prices
If you’re daydreaming about possible properties with no real plans, you’ll have to evaluate your budget and review realistic options. A beautiful rental in Malibu might seem appealing, but you could find it’s outside your price range. That doesn’t mean you can’t afford beachfront real estate, though.
Consider some alternate markets for vacation rentals, which are still attractive but far more reasonable in terms of cost:
- Panama City Beach, Florida
- Ocean City, Maryland
- Orange Beach, Alabama
Starting small is better than spending too much, too fast. If your investment property of interest isn’t within your budget, just take things slow and continue working toward your goal. As long as you move at a steady pace and make strategic investments, Malibu is waiting.
Extra Maintenance
The elements aren’t kind to real estate investors who don’t prepare for them. When you purchase a property near the sea, you’ll need to account for strong winds, heavy rainfall, heat, and humidity. You’re likely familiar with the damage that moisture can cause to a rental property, and beside an ocean, that damage intensifies.
Fortunately, you can protect your investment property from the environment with a few simple solutions. To prevent and mitigate mold, maintain your indoor humidity between 30 and 60 percent, drying any damp furnishings or materials within 24 to 28 hours. Keep a watchful eye, and monitor vulnerable areas.
Laws and Regulations
If only it were as simple as buying a rental property and finding a tenant. Things would be so much easier. This isn’t the case, though, and you’ll have to research the laws and regulations applicable to your rental before you decide to buy, or you’ll risk fines and far more serious consequences.
As you browse locations, see if the area permits vacation rentals. Some cities set a limit on the number of days a tenant can occupy your property, and you’ll want to know which places to avoid and which are more lenient with their laws. It’s much better than backtracking after you’ve invested your money.
Online Marketing
Your vacation rental is virtually invisible without marketing, which could make you hesitate. After all, you’re in real estate, not advertising, and you might feel like you don’t have the expertise to market your rental property appropriately. You do not need to worry, as there are plenty of online platforms that will help.
As you determine the best real estate marketing strategies for your rental, consider sites like Airbnb and HomeAway. You’ll draw interest with just a few photos and an appealing description, touching on the property’s features. You could also delegate the responsibility to a property manager if you have other obligations.
Property Managers
On the subject of property managers, you might need an extra hand with maintaining your beachfront rental. If you’re far from the property and can’t clean and tidy it yourself, you’ll need to seek assistance. It’s relatively common, and if you’ve been in real estate for many years, you know how useful a property manager can be.
Property managers can help coordinate your advertising, as well as maintain your rental property and prevent any issues from escalating. They do require a fee, of course, and you should expect to pay between 4 and 10 percent of the property’s monthly gross income. Prices will vary depending on your situation.
Continue With Caution
A beachfront property is attractive, but also risky if you’re unprepared. As long as you continue with caution and account for potential problems, you’ll enjoy high demand and returns. Just take things slow, crunch the numbers and review your options before making this type of real estate investment.
If you’re ever discouraged, remember this simple fact: Every challenge is an opportunity to learn.
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This article has been contributed by Holly Welles from The Estate Update.