Experts believe that buying a beach house can give you an excellent return on investment (ROI), on top of being able to give you and your family a place on the beach to vacation anytime you want. What many beach homeowners do is they buy the property and rent it out during peak season. For example, you can purchase a beach house on Pointe-Calumet Beach and live in it a few weeks a year, and then get one of those condos for sale in Montreal as your permanent address so you can rent out your vacation property.
Many property investors who purchase a beach house in a place with high rental demand and rent it out during the busy season claim they make enough money to cover the amortization and upkeep of the property for the entire year, and this allows them to live in it for free during off-peak months, if they want to.
But even though the idea is indeed very enticing, you need to first have a grasp of the economics of owning a property by the beach – the costs of ownership, the challenges you’ll face, and others. Remember that beach front real estate is very expensive and you’ll have to deal with high insurance rates and property taxes.
Costs of Real Estate
Expect to pay a premium for a beachfront property. Even if it’s not entirely beach front (as in you’d have to walk 10 minutes to get to the beach), it would still cost substantially more than a comparable property 10 miles inland. Most beachfront homes cost upwards of a million dollars.
We can’t emphasize this enough – you have to realize that you’ll be making a considerable investment when you decide to purchase a beach house.
The interest rate is always higher for those who want to take out a mortgage for a vacation property compared to an owner-occupied property. With beach houses, it’s even much higher. So if you’re to borrow $1 million, at a term of 30 years and a rate of 4%, you’re going to pay approximately $4,774 per month. If the interest rate is 5%, you’ll pay $5,368 per month. That’s a difference of $600. This only highlights the importance of finding the lowest interest rate you can find because a single percentage point can really hike up your monthly payments.
This isn’t exactly breakthrough information but it pays to know that ensuring a beach property will cost several times more than a comparable home in the city. Coastal area properties are also required to get flood insurance.
This pertains to, not only your mortgage but also your cable and utility bills. You’ll also be paying more in taxes because of the value of your beach home. Moreover, if you’ll rent out your property, then you’ll have to pay for things like advertising and marketing, as well as property management fees.
Although you can handle everything yourself, it’s always best to get a property manager who will oversee the signing of lease agreements and collect payment from your renter. They also take care of any issues in the property such as a broken fridge or HVAC unit, for an added cost, of course. Make sure you find a trustworthy property manager who can effectively market your beach house and ensure that it’s always in the best shape.
Overall, it does make sense to invest in a beach house, so as long as you fully understand the economics of owning one and that you’re aware of the costs and issues that may arise along the way.