Aug. 22, 2018
Are beach properties good investments?
This is loaded question and with our area being so close to the beach, owning and renting out a beach house/condo may come across your mind from time to time. There are pros and cons to owning a beach house/condo and renting it out. Just like with any investment, you need to know the pros and cons before jumping in with both feet.
Below are some questions your licensed Realtor may ask if you are considering making a beach home/condo the right investment for you.
First, are you certain the area you are interested in making a property investment in is a tourist destination? For the Galveston area, many families spend their vacations renting out beach homes or condos but location is everything. People like renting homes/condos with beach views and even more so with direct beach access. Homes on the bay are also in demand with direct water access. If there isn’t beach access or bay access what is nearby? Are there restaurants, entertainment and other tourist attractions close? You will need to ask yourself these questions.
How often is the area a tourist attraction? In the Galveston area you can certainly see a spike in beach property rentals during the summer months (of course as with any beach house/condo rental) but with Galveston you have the potential for a much wider rental time than with other vacation spots. Often tourist spots on the beach shut down many of the restaurants, activities etc. during the off season, with Galveston there really is never an “off season” among restaurants, activities, etc. Major restaurants, activity areas and tourist attractions remain open year round. The activity may not be as much during the “off season” but there are still places to go year round.
Below are some pros and cons of vacation rental investments:
You will always have a place to vacation or even just get away with family and friends. If you are paying the mortgage, why not spend some family time at your rental. You may need to be sure you can budget this into your monthly rental income. Remember though if you are staying this means you are taking the home or condo off the market to possible vacationers for that time.
Another pro of owning a vacation rental is the added income you will receive from your renters. Depending on what the going rate is for a nightly/ weekly stay, you could possibly earn your monthly mortgage amount in just one week of summer rental. If you can book straight through the summer, you should be fine during those down times after summer season. So, someone else is paying your monthly mortgage.
Appreciation of your property is another pro. The housing market is at a high and homes are appreciating. Having a solid investment and strategically planning for rental income will make from a great rate on your return.
Another pro: Since the property you will be renting out is technically a business, you can write off most of the expenses associated with trips to your property. You will want to be sure to keep all receipts to show proof of your tax write offs.
Just with any decision there are a list of cons to consider as well.
Expenses: There will inevitably be unplanned repairs, lost and damaged goods, unplanned maintenance issues and more. If you have a property management company over seeing your property you will owe them for their services.
Risks: With any beach location you run the risk of adverse weather, (hurricanes, flooding, etc.) which can affect the conditions of the property. Also, you must remember that you may lose renter income during times of disaster.
Unplanned problems: There will always be unplanned problems with any rental and when those issues arise you must fix them promptly or it could result in a bad review from a renter, loss of rental income or a much larger problem later.
Marketing costs: A con of owning a beach property rental is the ongoing marketing costs you will need to spend to keep visitors in your rental. You need to advertise your property and that costs money.
The choice to buy a vacation rental is one that should be thought through and carefully decided. It is best to contact an experienced Realtor to guide you in the right direction. A licensed Realtor with experience and knows the market like one of the knowledgeable agents with The Freund Group. Click here for possible Galveston investment rental properties.