Beach House Investment: Financials That It Entails

Weekend homes also called as second homes or vacation homes are currently an oasis of market activity in India’s real estate sector. The trend that is really catching on, nowadays, is investing in a property near the beach—your very own beach home that is also a source of regular cash flow. A beach home should be ideally bought after one’s primary home is secured. If the first home is debt free and one has sufficient reserves, then investing in a bungalow on the beach makes perfect sense.

Beach House Investment: Financials That It Entails

Beach House Investment: Financials That It Entails

Buying a beach home can be a good investment providing you with a regular source of income in the form of rent and also a place for spending vacation on the beach free of cost whenever you desire. Many real estate investors find a beach home in an area which is highly visited and with a high rental demand. The investor can make ample money to cover the expenses for the year. It gives an added benefit to the owner who can use it for free during the slack season.

Before you go head on and take the dive, you have to consider a lot of options; everything is not a fairytale with a happy ending. The challenges you can face will make you realize that everything is not as easy as you visualized. Expensive real estate, high end borrowing and the bills, taxes, property management represent some of the hurdles that you will have to cross.

Real Estate Prices

Nothing comes cheap especially a house on the beach. Houses situated a walking distance from the beach cost a bomb as compared to houses located in the interiors. The fact that real estate is expensive on the beachfront is well known fact, but the vital part lies in understanding the economics of it and what you will be shelling out.

Borrowing Cost

The mortgage cost of a vacation property is higher than owner-occupied property. Beach houses are especially challenging since, due to high prices, it is likely to be a jumbo loan, which tends to be costlier than a confirming loan.

Bills

The bills at the end of the month will be higher for the beach house and more over since it is an income generating investment you have to take care of a lot of things. Your tax bills will be hefty for this income generating property and you have to look after the property maintenance and maybe the legal costs if you land up with a tenant dispute. The expenses could add up and you may land up paying quite a slice of your profits.

Property Handling/Management

Collecting cheques and signing agreements is not the only things you have to do, if your property needs some repair work to be done, as an owner, it is your responsibility to get it fixed. Painting, roof maintenance, pest control, maintaining the appliances etc. all have to be looked after by the owner. This means hiring a property manager who will look after the property and market it for you.

The home owners insurance can be heavy on the beach house property. So keep all this in mind then take a step forward to invest in a beach house property. If worked out properly you can easily enjoy your rental generating property.

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