Waking up to the sounds of the waves hitting the shore,seeing the ocean change colours throughout the day, feeling the cold sea breeze as the sun sets on the horizon, a beach house is stuff of the dreams. Buying one is not. The reality is that buying a beach house may end up becoming a nightmare if you’re not prepared. Both economy and safety wise, you need to take care of everything from start to finish to not end up being in the hell of audits, and in some cases, bankruptcy. Here, we bring you some tips as so what to keep in mind while buying a beach house.
1. Borrowing and real estate costs
The general cost of a beach house is way more than a normal house in the suburbs. And many banks that offer loans on vacation properties make sure that the mortgage interest rate is higher as compared to a property situated inland. So, a difference of even one or two per cent of interest rate can bring up your charges up to one thousand additional dollars per month.
Another huge thing to keep in mind is the insurance of the house. Beach houses require a mandatory insurance, and the banks and insurance companies take full benefit of the fact by hiking up the prices. The most basic flood insurance for a beach house may end up costing you an annual premium amount of up to $8,000 or even more in states like Florida.
3. Property Management
Many people buy the beach houses for the purpose of renting them. This means that if that’s your intent, you must know beforehand that the process of managing the property isn’t just about collecting the rents or signing the lease, but much more. You will be responsible for getting all the repairs done, along with the management of the area and cleaning the house. This is a heavy task and you most probably will have to hire a property manager, who will take a minimum of 7% of the rent you’re taking which might end up harming your profit margin.
4. Bills and Taxes
Yet another hurdle in buying a beach house is taking care of the bills and taxes. Since the value of a beach house is higher than an average house, you’ll end up getting hefty bills and taxes that go beyond your mortgage and utility. Apart from that, you will also have to pay for the marketing of your property that includes promotion and advertising. On the top of that, you might also have to end up paying for the legal costs if any of your tenants end up damaging your property and refuses to pay.
We come to the construction part now. Many people don’t bat an eye if their construction company offers a cheap construction by giving them a cheap roof. Don’t fall for that, as the roof is the most susceptible part for damage in a beach house. Make sure yours is perfectly on the nose with safety standards and quality, to avoid paying for repairs which might end up costing you more than $25,000.
With all this information at hand, you are now prepared for thinking practically if you can handle the economics of buying a beach house.Make sure to assess every point properly and check your funds before making a decision.