Are you wondering how to invest in beach rental properties? Investing in beach rental properties is an exciting endeavor, and can be lucrative when an investor takes the right steps. Knowing how to invest in beach rental properties does not have to be a burden. This article addresses the many important considerations to be determined before investing.
Your Financial Standing
Vacation properties often require more time, work, and effort than originally anticipated. The costs of owning and renting a vacation home can quickly get out of hand and understanding factors like rent rates, vacancies, management fees, maintenance costs, and home-value increases is essential. Beach properties deal with unique challenges, such as the damaging effect of salt air on the property and the increased maintenance costs that come with it.
Another challenge is the seasonal nature of beach vacation property. While a business might be booming in the summer peak months, do you have a plan to get through the cold weather season when people are not booking beach vacations as frequently? These are concerns that need to be really grounded before moving ahead too quickly.
All About Location
Once you have determined that a beach investment is right for you and your financial situation, it’s time to pick a location. We all know that when it comes to real estate, location is key. Each location comes with its own unique pros and cons, but at the end of the day, it is the one thing that you are not going to be able to change after purchasing. So, how do you begin to choose a location for a beach investment property?
Not all cities are the same, and even the different areas and neighborhoods within a city have their own considerations attached to them. For this reason, you should try to narrow down your location as much as possible. Do your research on key factors such as market conditions, employment rate, weather, proximity to certain amenities, demand, inventory, etc.
Cover The Bases With An Analysis
Because vacation properties ebb and flow with vacation patterns throughout the year, vacation properties are a completely unique type of real estate investment. Ask yourself, is there enough consistent demand for the vacation rental investment to be considered sustainable? Taking a look at vacation trends, as well as property types, that are influencing a particular area should be taken into consideration.
Once you figure out what type of property you’d like to buy, it’s time to make some market comparisons, which show how a particular type of asset is performing. The Zarpas Group can help you keep up to date with the latest market trends and regularly publishes the Long & Foster Market Minute for the Virginia Beach City Housing Market here.
Extrapolate Income and Costs
Once you have a good understanding of the market, you are ready to start extrapolating income and costs. While income will vary from area to area, a good rule of thumb is to aim for a weekly rental rate that is 10-20% above your monthly mortgage. If you can lock down a high-demand property, you could feasibly charge at an even higher rate, but it is important to find the right balance between maximizing monthly income while not driving away potential renters due to overly high prices.
After raising income to cover more than just monthly mortgage payments, you still need to calculate for the offseason slow periods that come with beach rentals. While income may be strong while the weather is hot, you need enough income to offset the rest of the year. For this reason, you should factor in an expected vacancy rate of at least 25%. What’s more, you need to account for a variety of other fees: condo fees, HOA fees, property management fees, maintenance costs, etc.
The biggest one of these is the property management fee. While this doesn’t apply if you act as your own landlord, many owners choose to employ the services of veteran property managers, especially if the owner does not live in the area or cannot regularly visit the investment property.
Try Before You Buy
Before locking in your investment, it is a good idea to vacation in the area yourself. This will give you a first-hand experience with the wants and needs of vacationers. Ask yourself, would you want to vacation in this area yourself? Consider practical things such as what type of attractions are nearby, and how the popularity of these attractions peak and ebb throughout the year. Using popular online services like Airbnb, HomeAway, and TripAdvisor to make your visit arrangements can give you good insight into how vacationers are booking their trips and how they are evaluating different properties.
Team Up With The Katie Zarpas Group
Reach out to the real estate professionals at the Katie Zarpas Group in Virginia Beach for more information about buying a beach rental property in Virginia Beach or the surrounding areas. Before entering the luxury real estate industry in 2005, Katie Zarpas worked as an assistant film director and thus acquired many valuable connections in the entertainment business. Katie has since earned several accolades, including the Hampton Roads Realtors Association’s prestigious Gold, Platinum, and Diamond awards. She has also been ranked as one of the top realtors in the country.
At the Katie Zarpas Group, we help clients obtain key information about listings in Virginia Beach and the surrounding areas, including Norfolk, Chesapeake, Portsmouth, and Suffolk. We strive to constantly track local real estate market trends, which means we can help you estimate your desired home’s value. We will always put your priorities first, regardless of what you are seeking. Call the Katie Zarpas Group today at (757) 500-5596 or contact us online to learn more about our work.