A rental beach house can be a sound investment if the conditions are right and the Buyer’s expectations are realistic. Here are some important factors to help decide if a beach house is a smart investment for you.
Beaches in regionally mild climates are a leading travel destination, and after years of steady growth, the demand for vacation rental beach homes is stronger now than ever before.
Location, Location
To maximize rental demand and assure performance, choose a house located on or within walking distance to the beach. A 10-minute drive may seem close enough when you live 700 miles away from the beach, but think again!
Choosing a home in a tourism friendly beach town, or a rising travel destination, is another important consideration. Significantly, this means local businesses are available to fulfill visitor needs, and town administrators as well as residents are acclimated and prepared for seasonal impacts.
TIP: Neighborhoods in the same area do not necessarily bring equal demand.
Calculating Rates and Occupancy
As with location, rental rates and frequency of occupancy will also drive the bottom line. Subject to seasonal demand, weather events and existing rental inventory (your competition), determining rates and occupancy will require some research and local knowledge.
A qualified local real estate agent is a perfect resource for firsthand information about regional and community trends. A skilled real estate agent can also help assess storm damage risks, obtain tax and insurance costs, and evaluate inspections to help you make the best possible decision.
TIP: High occupancy rate is more important than a high daily rate.
Weighing Rental Revenue & Costs
With conditions optimized, beach house rental income can offset homeownership costs like utilities, upkeep and mortgage payments, as well as costs for managing wear and tear, which is both unavoidable and an opportunity to keep a rental house feeling and looking fresh.
A professional property management service can increase marketability, maximize revenue, and in addition to timely re-investments and mortgage payoff, can build equity.
Keep in mind, expenses as well as downtime for maintenance and improvements can be deducted. Also, rental homeowners can benefit from the 1031 Tax Exchange, which defers capital gains tax by swapping one investment property for another. Consult a financial advisor or tax accountant to learn more.
TIP: Repeat guests return to rental homes that see regular improvements, large and small.
Holiday Home for Personal Use
Even if you purchased the beach house to make money, the property is yours to enjoy when you need an escape. Having a second home at the beach provides the vacation of a lifetime!
Handy homeowners can cut down on expenses by taking care of general maintenance and bi-annual deep cleans. Plus, periodic homeowner stays can bring valuable inspiration and insight on how to strategize for future improvements.
TIP: Don’t buy a property for rental investment that you wouldn’t use.
Demand for Rental Beach Homes
We love to get out and explore – it’s human nature! As much as we love to get away though, beach rental homes are sought out for the same creature comforts we left behind – privacy, space and convenience. Oh, and comfortable beds!
Turns out, guests want more than just a relaxing day at the beach. Rental home amenities improve the guest experience and provides a competitive edge. Moreover, close proximity to other activities and public venues, like golf courses, biking trails and restaurants, will serve to expand rental prospects.
TIP: The wider the choice of amenities, the wider the prospective booking audience.
Consult the Experts
Buying a vacation home to rent out can be a good investment if the purchaser sticks to their budget and carries out their due diligence. To make a sound decision, rent a home in the area you’re thinking about making a purchase, ask questions, talk to a local real estate agent, and sleep on it.
Litchfield Beach/Pawleys Island Sales and Property Management
For over 60 years, Litchfield Real Estate has long provided the expertise and support second home investors need to purchase their property in the Pawleys Island and Litchfield Beach area. Once the investment is made, securing property management is just as important.
Partnering with Litchfield Real Estate is a smart way to secure and protect your investment. Not only can we protect your real estate asset, we can also bring assurance with boots-on-the ground attention and can help build equity.
We can even be a source of enjoyment, because we make it easy to be away and a pleasure to return! For assistance with real estate sales or purchasing, or to learn more about our management services, contact us today.