Real Estate Investing—The Economics of Owning a Beach Rental Property
Owning a beach rental property is a dream investment vehicle for many commercial real estate investors. They offer an excellent return on investment, hold their rental market pretty well, and, as an asset class, tend to be the least affected by changing property market trends.
That said, buying and owning beachfront property has always involved a different set of considerations compared to inland property. For starters, these investment properties require mandatory flood insurance and often incur higher property taxes and management costs.
So, here’s everything you need to know about buying property on the beach.
1. The Florida Real Estate Market Is Red Hot
Particularly along the coastlines. Florida’s real estate market continues to be one of the most profitable investment markets in the country. There’s no doubt that purchasing commercial real estate in Florida is a rewarding experience, no matter the asset type.
That said, every submarket is different. Understand the dynamics of the market you’re looking to invest in to make sure your return on investment will be worthwhile.
2. Understand the Local Rental Market
Not every beach community makes for a great real estate investment. Some submarkets in Florida are dominated by overbuilding and foreclosures, so it’s important to understand what exactly you’re getting yourself into first.
Make sure you’re buying a property that will actually return your investment.
3. Expect to Pay More for Both the Property and Other Beach Property Bills
Buying a beach property involves costs that go far beyond the mortgage. As with any investment, you must be insured, but the costs are likely to be higher, considering you’ll have to get flood insurance. And there’s the property tax bill, which tends to be considerable given the high value of oceanside properties.
There are also the inevitable repairs and renovations that can come with owning any property, particularly a beachfront property.
4. The Location Matters
Well, you already know this aspect. Still, it bears repeating. It’s way too easy to get engrossed in the look and ambiance of a property and fail to consider the long-term financial potential of the specific area.
There are many resort areas in Florida, each one with its own charm and advantages. A knowledgeable commercial agent can help you find the perfect property in your desired location.
5. Get an Inspection
Nothing lasts forever, and this adage is that much truer when you own property along the water. That’s why you should never skip out on an inspection when buying property along the gulf coast. Beachfront properties face several risks, from landslides to rising sea levels, and the salty sea air tends to corrode things a lot faster.
So, hire an inspection company experienced in beach properties as they know exactly what to look for.
6. Investigate Prior Insurance Claims
Investing in beachfront property comes with a different set of risks. These properties are vulnerable to wind and water damage from coastal properties, landslides, and bluff collapse. Usually, an inspection is enough to uncover any structural issues, but it’s wise to err on the side of caution by going one step further.
Have your commercial real estate agent go through past insurance claims to ensure there are no surprises when it comes to maintaining the property down the line.
7. Determine Your Risk Tolerance
Prospects have many reasons to invest in a beach property. Some investors are looking to lease out the property during periods they’re not utilizing it, while others purchase such property for the sole purpose of generating rental income.
Making a sound real estate investment is really all about aligning your purchasing decision with your risk tolerance. Generally, the higher the risk, the higher the rewards. Owning a beachfront property can be a great long-term investment strategy when done right.
8. Two Different Types of Contracts Exist
The responsibilities of the buyer and seller are typically spelled out in the contractual agreement. In the first type of contract, or standard contract, any problems found within the property should be dealt with by the seller.
Alternatively, there’s the “As-Is” contract, where the seller isn’t obligated to fix any issues within the property. Such a contract gives you more flexibility to pull out should the real estate deal go sour.
9. Be a Guest Before You Buy
Buying a beachfront property is the perfect opportunity to “try before you buy.” There’s no better way to assess the value of the property as an investment vehicle than to stay in it for a few days.
Check proximity to restaurants, recreational activities, and tourist attractions.
What do you love about the property? Is this a place you would visit over and over?
10. Hire the Right Professionals
Investing in a beachfront property requires quite a bit of due diligence on your part as an investor. You’ll have to work with a team of experienced professionals to determine everything from the value of the property to the existing and potential geological dangers.
You can successfully navigate the Florida commercial real estate market with the right real estate agent. They’ll do the grunt work for you and ensure you have all the information you need to make the right decisions.
11. Look into Property Management Firms
If the property is going to be used as a rental, an experienced property management company is a must-have.
Property management involves a lot more than signing lease agreements and collecting rent checks. You’ll definitely need an extra hand to maintain the property. Not to mention, a good property management firm can help coordinate your marketing efforts, maintain the property, and prevent any issues from escalating.
Consult An Commercial Rea Estate Agent Like Anthony Maccaroni Before Owning a Beach Rental Property
Take things slowly, crunch the numbers, and partner with a local agent. These are the keys to success when making this type of commercial real estate investment. If you’re looking for the perfect beachfront investment property and you’d like the support of an experienced agent, feel free to get in touch with Anthony Macaroni.
Whether you want to invest in hotel or motel real estate, I’ll work with you to devise the best possible plan for your investment journey. I have years of experience in Pinellas County and Clearwater Beach, Florida. You won’t find this level of experience and knowledge of the area and real estate market with any other agent or firm. I will even help you find off-market properties no other agent or firms has access to.
Call me today to begin your commercial real estate investment journey with a free consultation.