Should You Invest in a Beach House?

You can find several beautiful beach properties in Navarre FL. It’s a beautiful beach community filled with retirees who want to enjoy a laidback life. But before you look into Navarre FL real estate, you have to ask yourself, is investing in a beach property a smart thing to do?

Well, the bottom line is – a beach house can give you a high return on investment with a reliable income stream. Besides, buying a beach property means you can have a free holiday anytime you want. Sounds like a dream, right?

But just like any real estate investment, such as when you buy Pensacola real estate or Milton FL real estate, there are factors that affect whether you’ll be making good money from your investment or not. So before you dive into making the biggest investment ever, you need to understand the economics of owning a beach home and the challenges you will face.

Real Estate Costs

A beachfront location always command a premium price. Even if the property is walking distance to the beach, it would still cost a lot more than a house inland. So this only further emphasizes that you will be making a huge investment making it all the more important to understand the investment economics involved, especially the costs you will be dealing with.

Borrowing Expenses

The interest rate for your vacation property mortgage is often higher than an owner occupied property. Because of the high prices of beach homes, you may need to take out a huge loan. If, for example, you need a $1 million loan, the interest rate no matter how tiny the percentage difference is, is very important. With a $1 million loan, a 4% interest rate under a 30year term will cost about $4,774 per month. But if the interest rate is 5%, you will be paying $5,368 every month for the principal plus interest. That’s over $600 in difference each month which amounts to nearly $20,000 in 30 years!

Insurance Rates

Your homeowner’s insurance is another consideration as beach houses often command a higher insurance premium. You will need flood insurance which is required for all coastal locations.

Bills

It’s not only your mortgage and utility bills that you need to worry about. You also have to consider your tax bill which can be quite high considering your property’s value. And if you will be turning it into an income property, you need to pay for marketing, hiring people to show and manage your property, and many others.

Don’t get this the wrong way though. Buying a beachfront property or even a property close to the water is a great investment. But you need to do due diligence and a lot of research to ensure you’re getting the best property for your needs and budget.

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