Answer for "Is a beach house a good investment?"

Debbie Jacobson real estate agent
  @ Properties Michigan

This question might have crossed your mind while planning for retirement, or... after inheriting your aunt’s under-the-mattress savings. You spread your wings ready to fly to the nearest beach, and suddenly, it occurred to you that you could live there forever. It’s good to be away with the fairies from time to time, but before investing in a property near the beach, you must make sure you have your feet on the ground.

SWOT Analysis

No tool is better at revealing the pros and cons of a beach house than a SWOT analysis. If you’ve never heard of it, don’t worry! It is a fast way of identifying the strong and weak parts of a business. In real estate, this is not a common practice, but it can be adapted to help you make the best purchase, by choosing a property that scores more strong points than weak points.  

I know that living on the coast is often taken lightly, but it shouldn’t be. Let’s borrow this marketing concept and apply it as if we were the best real estate investors in the market.

It doesn't matter how you buy a house, whether you are an individual or an LLC - you are an investor anyway. Try to have a business approach and make the most out of your beach house.

So a house on the beach IS a good investment if you treat it like one. Look at that house like it is a long term business that generates costs. How do you cover those costs? Will you pay for them out of your own pocket or will that property bring some kind of revenue? Do the math and see if buying a second home by the sea won’t be an equally good investment, especially if you will list your beach house on Airbnb.

Now, let’s look at the strengths, weaknesses, opportunities, and threats.

 

Strengths - the benefits of owning a beach house

Why would you buy a beach house? What are the pros of living on the coast?

Start your SWOT analysis by filtering the strong arguments first - the ones that would stand tall no matter what. A seaside residence could be a good investment  because of these reasons:

  • For the beautiful scenery (including some amazing sunsets), maybe some large windows with an ocean view?
  • To have access to a private beach and a swimming pool.
  • To have a retirement home.
  • Having a family vacation home will provide short escapes and holidays for the whole family.
  • To rent it during the peak season or outside the season. The rent for one in-season week costs as much as the rent for an off-season month. For example, if your house rents for $4,000 a week in the summer, you may get $4,000 for one month in winter.
  • To reside there permanently, integrate into the local community and practice water sports or fishing whenever you want. No bookings required and no time spent on the roads!
  • For health reasons - the salty air, the water, the sun… all have their health benefits. Living on the coast you can enjoy all the benefits of ocean water! I could spend all day looking at the ocean waves crashing and ebbing onto the shore… The benefits of ocean water are more psychological than physiological. The sea is the best stress relief treatment. And since stress is linked to many skin conditions, such as psoriasis and acne, the ocean water can improve the symptoms and reduce the severity of the flares.

 

Weaknesses - disadvantages of owning a beach house

What could make you change your mind and give up on your dream?

Unfortunately, all good things may come to an end. This section could make you change your mind. Right now you are just listing the pros and cons of living on the coast. In the end, you will have plenty of time to weigh in. Will the benefits outcome the disadvantages of owning a beach house?

  • The price - beach houses are very expensive and may require a large down payment
  • High insurance costs
  • High maintenance costs
  • Having to hire a property manager and share your profits with him/her
  • Extreme weather events (if you’re living on the East Coast)
  • Earthquake-prone region (if you’re living to the West Coast)

 

Threats for your beach house project

What could threaten your dream and prove it as not such a good investment?

It takes time to understand the real estate market. Don’t overestimate the benefits of owning a beach house. Keep a balance and a down-to-earth approach.

  • Credit risk - periods of unemployment or health problems pose a serious threat to your mortgage. Everybody has a different credit risk, but to keep it low, I would recommend that you buy a beach house as soon as you can and as long as you have a good enough credit score. Don’t wait until you spot the first gray hair! I know it could add some pressure on your finances, but the dream of living on the coast later asks for some sacrifices. If you accept that, your dream property by the sea won’t feel like you’re having the weight of the world on your shoulders.
  • Damages to the property due to extreme weather or if living in a building, flooding from upstairs neighbors could make renting impossible for an extended period.
  • The area could attract fewer tourists
  • For properties with a private beach, strong waves and floods could make the beach area shrink significantly over time. Could you put up with such a loss?
  • Are there any public projects for which your property might become subject to government acquisition?
  • Global warming is causing a rise in the sea level. It already affects the atolls in the Maldives and is a reality on the East Coast and the Gulf of Mexico.
  • Red tides and awful smells from rotting algae? That is not really what you had in mind for your next holiday, I guess.
  • And what could completely ruin a vacation if not a hurricane? Buying a house in a region hit by hurricanes will lower your chances of renting it during the whole summer season, No matter how sturdy the construction is.

 

Opportunities that a beach house brings along

What else could turn your money into a really good investment?

Any SWOT analysis is like a brainstorming session that ends optimistically, with some opportunities that can overcome threats and weaknesses. These opportunities will outshine the disadvantages of owning a beach house and will prove everybody that a beach house is a good investment after all.

  • Invest in tourist accommodation and treat your property as a hotel! Pay attention to details and decorate your place in a way that will attract positive reviews everywhere. Explore the beauty of the hospitality industry! After all, the tourist flow is what makes living on the coast so pleasurable.
  • Learn more about local tourism and identify new services for tourists. Start a small business that could bring you another stream of income! It could be a cake shop, a fast-food franchise or an online magazine for the area - a place where you can also advertise your property for free!
  • Become a commercial real estate investor! Who knows? Maybe your house on the beach is just a trampoline toward more significant real estate investments. You may even look into becoming a stakeholder and buy stocks of promising local projects. One good investment will lead to another one...
  • Your house on the beach can change your career, too! It may bring new job opportunities, either in private companies or in the public sector/local administration.

Do this analysis for every beach house you find. Obviously, you will choose the one that has more strengths than weaknesses. But keep in mind that if you intend to rent that property, you must think like a hotel manager! You are a business person, after all, and you should be proud of this!

 

Affordable beach towns

Beach living can be affordable if you know where to look. Here are a few beach cities to help you get started.

MYRTLE BEACH, South Carolina

In this city with 32,800 inhabitants, the median home price is $234,800, but the sunny side is that it doesn’t have a hefty property tax. You could rent your apartment for about $900 a month. For an overnight stay, tourists would pay between $50 and up to $100. This area is famous for its Grand Strand (60 miles of sand and sun) and for the golf courses. Oh, and let’s not forget the SkyWheel, one of the tallest Ferris wheels in the country. If you’re interested in finding a beach house in this area here are a few experienced real estate agents from Myrtle Beach who will locate the best seaside property for you! Get in touch with them and they will make sure that your house will be a good investment!

 

GULFPORT, Mississippi

With houses as low as $45,000 on the market right now, this beach city has something to offer to any budget. October and November are the best months to visit, and also March. Summers are hot but with a great risk of extreme weather. Always stay up to date on the weather forecast for Mississippi!

The average rent for a studio is $815, while tourists can find a place to stay for less than $100/night. The main attractions are: The Institute for Marine Mammal Studies, Lynn Meadows Discovery Center - the first museum for children in Mississippi, and Gulf Islands Water Park - $54.99 for a 2019 season pass.

This city attracts tourists of all ages, so if you are interested in buying a property please contact one of our recommended real estate agents in the Gulfport, Mississippi.

 

JACKSONVILLE, Florida

St. Johns River provides plenty of waterfront properties in this beautiful city. Located only 2 hours’ drive away from Orlando and 1 and a half hour’s drive from the famous city of Daytona Beach, this city is home to over 890,000 people. With decent properties starting at around $129,000 and rent at an average of $1,000, you can recover your investment in a maximum of 10 years. Among the main attractions are the Cummer Museum of Art and Gardens, Fort George Island Cultural State Park, and Adventure Landing Jacksonville Beach Shipwreck Island Water Park. Tourists can also explore the city with St. Johns River Taxi and Tours. Affordable tourist accommodation is not hard to find.

Why not see some properties in this city right now? Book a real estate agent from Jacksonville, Florida and, who knows?, maybe you’ll find the house of your dreams…

 

VIRGINIA BEACH, Virginia

This beach city boasts some fine beaches preferred by tourists flocking from late May through September. Houses are priced between $78,000 and $7.2 million, with an average rent of $950 for a studio. You can also get a better price for renting your property to tourists, through Airbnb, due to the long summer season. Inhabited by more than 450,000 people, this city has plenty to offer. Main attractions would be Virginia Aquarium and Marine Science Center,  the Adventure Park, and the Military Aviation Museum.

Our real estate agents from Virginia Beach, are ready to show you around and help you find the right investment property.

 

PALM BAY, Florida

Residential properties in this city are priced from $190,000, with an average rent a little lower than what you would expect: only $953/month. To escape the cold, visit between February and mid-May and from late October to mid-December. Accommodations for a family with two children is between $70 and $1,000 (for a property with ocean view), according to Airbnb. Car lovers will definitely enjoy a visit to Larsen Motorsports, after visiting other attractions such as the Palm Bay Marina, or Shore Lanes for some bowling.

Would you like to explore the area and check out some properties for sale? Contact our real estate agents from Palm Bay, Florida and pack your luggage! A beach house might be a good investment after all...


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