If you have purchased a coastal home lately as an investment opportunity, you are not by yourself. Many investors and homeowners state that they are purchasing coastal homes as a secondary home or vacation rental home. With all the foreclosures and the low market prices, many are considering flipping a coastal home to make a future profit. There are few things you ought to be aware of that could hold back your profit potential.
Local county governments all treat property taxes differently. If you hold the home for a couple of years, you may be hit with a rise in property taxes. In these tough financial times, many local governments opted to either reduce the property taxes or freeze them for a period of time. When the market begins to recover (and it will recover) the local government could reevaluate the amount of the property taxes and raise them. This will likely vary with different markets. Many red-hot real estate markets have experienced property taxes double every few years in the past as a way of curbing the demand in the area.
If the home is not going to be your primary residence, you will likely pay a higher tax rates for secondary home owners. Secondary home owners generally pay about two times higher taxes than someone who is lives in the home year round. Ask your local tax office what both rates will be. Also, bear in mind that after you renovate the home the value will be reassessed, therefore the taxes and the insurance will be higher due to the increased value.
If you bought a coastal home that’s been vacant, foreclosed, or just lacking maintenance, you likely negotiated a discount with the hopes of renovating the home. Coastal homes have very stringent zoning and building codes. If you are not familiar with these rules, you may need to seek out the assistance of someone who can guide you in your efforts. Items such as windows and doors now require very high impact ratings. Impact windows and doors are very expensive and can easily cost more than anticipated. Replacing a roof many likely require more than just replacing the roofing material. Items like roof straps may need to be installed to bring the home up to current building codes.
While talking to your building contractors to obtain your renovation bids, a good idea would be to double both the estimate and the time table. At some point you can expect delays due to weather, material deliveries, and other out of the blue problems that will affect both price of the project and repair time table.
While projecting rental revenue for your coastal home, you should talk to a few local property management agencies about what the local economy and what the daily, weekend, and weekly rental rates are for comparable sized coastal homes. Make certain to inquire about what the management fees are and what they include. Most services like housekeeping, maintenance reviews, and service calls are generally included.
Determine how long of a vacation season the area experiences. Areas like Florida will likely rent out year round, while coastal homes in Maine may only rent out from May to September. This will affect the amount of rental income the property will draw.
Closing Comments
If you are shopping for investment opportunities in coastal homes it is recommended that you begin by searching the internet. Online real estate marketing services and local real estate web sites provide listings, photos, and even video tours online. Once you find the property that fits your needs, you can then call or email the agent or seller with any questions you might have.
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