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.
Property taxes vary greatly by location. In these tough financial times, many local governments have reduced the property taxes as a means of enticing people to buy new homes. As market conditions improve, local governments will likely reassess the amount of the property taxes paid and raise them. This will likely result in you getting hit with higher property taxes down the road. This will vary based on the local market.
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.
Many vacant coastal homes and foreclosures have been lacking maintenance. You should be able to negotiate a discount on the purchase of the home. Coastal homes have very strict zoning and building codes. It is recommended that you speak to some local building contractors who can guide you in your renovation efforts. If you have to replace the roof, you will probably be replacing more than just the roofing material. Some improvements to the framing such as roof straps may be needed to bring the home up to code. Replacing the windows and doors will probably require upgrades to windows and doors with high impact ratings which can easily cost more than anticipated.
When speaking to your building contractors for renovation estimates, a good idea would be to double the cost and double the time frame. There will likely be delays due to weather, material shipments, and other unforeseen problems that will affect both cost and repair time.
If you are planning on renting out your coastal home to vacationers, you should do your homework on the local economy. Call around to local property management offices to determine what similar homes are renting for on a daily, weekend, and weekly rate. Ask them about their management fees and what is included as part of their service. Services like housekeeping before and after tenants are usually 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.
In Closing
A home buyer looking for investment opportunities in coastal homes is recommended to begin their search online. Online listing services and real estate web sites allow you the opportunity to view inventory online. You can then ask real estate agents or sellers questions about potential properties before planning visits to the area to save time.
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