Are you shopping for beach real estate for sale? Investing in a nice piece of beach real estate has a lot of benefits. When you own beach real estate, you have a vacation at your fingertips, anytime you have the time. Your beach real estate might generate some income for you, and if you strike while the iron is hot, you might be able to buy it cheap and sell it for a tidy profit down the road.
However, not every person benefits from owning a beach condo. If you don’t know what you’re getting into, it can size up to be a money pit that you don’t get much value from. To help you avoid bummer and a half, we’ve put together a list common mistakes that make people regret their beach condo purchase.
- MISTAKE: Investing in a beach condo as a retirement fund.
The real estate market is a tricky girl. When you invest in real estate, you’re taking a gamble that you’ll be able to make a profit off of it. It’s hard to estimate what the value of properties will do in the future, and if you’ll be able to make a profit or not.
You might be able to make some money when you sell your beachfront condo, but you might not. Keep in mind that in order to make any money off your purchase when you sell it, the value has to grow more than 6% (since that will be taken in closing fees when you sell). If your beach condo is your whole nest egg, you might be up a creek without a paddle. If you have the money to invest in a beach condo and enjoy it now, go for it. But if that’s your retirement plan, you’re better off making another kind of investment. - MISTAKE: Underestimating the costs of owning a beach condo.
You might assume that when you purchase a beachfront condo, your dream vacation home sits there at your disposal for only the cost of the mortgage. However, owning a piece of real estate — even one you don’t use much — requires ongoing costs. You’ll have to pay property insurance, taxes, and condo or HOA fees. Even when you aren’t there, the grass still grows. You’ll have to pay someone to upkeep the property. Unoccupied vacation properties are often targets of theft and vandalism. You’ll have to pay for ongoing security monitoring. If you don’t expect these costs, it can be a serious wallet drain and zap all the fun out of owning a vacation home at all. - MISTAKE: Skipping over the fine print.
Not all vacation rentals are created equally. Many come with stipulations from the HOA or condo association that might take all the joy out of owning your beach condo. Some beachfront condos are banned from using the property as a rental. If you are relying on renting out your vacation home when you aren’t using it to help cover the cost of it, you might be royally flushed to suddenly realize you aren’t able to do that. Other condo associations that do allow you to use your property as a rental have hurdles you have to leap through, such as the decor you’re allowed to use in your own property, or the property management company you use. The point is, before you buy a beachfront property, take a moment to read over the fine print! - MISTAKE: Overestimating the income that you get from your beach condo.
In addition to the costs that come with owning a beach condo at all that we mentioned above, renting it out also has its own set of costs. You might have pay an advertisement agency to get renters in your beach rental. You’ll have to pay a property manager. You’ll have to pay for the unit to be cleaned in between visitors. You’ll have to account for downtime that the rental won’t generate any income. Depending where you are, this might be entire seasons that you make zero dollars off your rental property, but it’s still costing you money to own it. Before purchasing a beach condo, sit down with a financial advisor and discuss the value of using it to generate income, and if it’s worth it.
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