Buying a Beach House That Pays for Itself: Is That Possible?

Imagine yourself reclining on a lounge sofa, drinking a margarita as you watch the waves lap up on the shore close to your beach house. You enjoy a day of surfing, skimboarding, snorkeling, and other water activities until you cap off the day with a breathtaking sunset. Then you retreat to your beach house to enjoy a night of unparalleled peace and calm.

Living in a beach house sounds like quite the dream. As much as you want to turn it into a reality, you would have to worry about the costs that come with it, along with your other regular expenses. But what if the beach house can pay for itself?

A vacation home as an earning investment

People all over the world are generating enough income from their beach houses through rentals on some parts of the year, so they can live in those beach houses for “free” for the rest of the year. But before you buy that beach house, you need to understand that this isn’t a shortcut for you to get free stuff. Investing in luxury real estate isn’t always luxurious. It’s a big financial decision that could either get you passive income and equity gains or leave you in debt. You must be headstrong when you venture into the world of real estate so that you don’t end up making the wrong decision.

Let’s take the plunge and see how you can turn your luxury purchase into an investment.

It’s all about location, location, location

The first thing you need to worry about is location, which is often the most critical factor for turning in a profit. Which location is an attractive area to live in or spend a vacation in? Is the neighborhood safe? Are there commercial centers such as shopping malls nearby? Is it easy to get around?

Beach houses are a great option, as the home is accessible to a nearby attraction (obviously the beach!). You also need to consider the seasonal activities and weather in the area, as these are what determine whether it would be a good vacation spot for potential renters. It’s financially better if what you choose is desirable all year round.

If you need help with your research, you can try the Mashvisor tool. You can sign up for a free trial, and then set the criteria based on your needs such as location, low vacancy rates, budget, and high cash-on-cash return. It will then generate a heat map analysis that shows you the best spots for investing in a waterfront property.

Historic data to avoid “should’ve, would’ve, could’ve”

houses by the beach

Ask yourself if now is the right time to invest. In general, real estate is stable, but luxury real estate can have outrageous highs and lows depending on the timing.

To ensure that you aren’t buying at the wrong time, gather historic data on tourism, natural disasters, price-to-rent ratio, the housing market, and the overall economy. Check in which direction these factors are trending. The best times to invest in upper-tier real estate are usually when the market peaks and the property value rises.

Once you’ve picked the best beach house and figured out where and when you’ll be buying, you need to determine your rental rates. Make sure that you set a rate that will generate a profit for you, considering the cost you paid for the property and operational expenses. But rates aren’t a “set and forget” type of deal. You need to monitor and update these prices based on the season.

Spice up and market the guest experience

The next step would be to create a beautiful space for your guests by upgrading the appeal of your beach house. You need not be an interior designer to figure out that quality linens and clean kitchens will give your guests a better experience. Other vacation rentals level up with fun themes such as boho and Star Wars. Some add perks such as Wi-Fi and hot tubs. Whatever you decide on, a little more effort can increase your earning potential.

With everything ready, all you need to do is to market your beach house. Marketing real estate was a lot more difficult way back when, but vacation rental websites such as Vacasa and Airbnb have done wonders in drawing in potential guests. During this COVID-19 pandemic, more people have flocked to Airbnb and Vrbo than those to hotels.

Aside from getting your property on the Internet, you get access to the existing members who use the platform for their rental needs. There are also additional tools such as calendar management and algorithms that determine rates. All you need to do is to make sure that you take Instagram-worthy pictures and write up a grand description that highlights what makes your beach house the place to be.

The bottom line for beach houses

With the boom of vacation rentals, owning a luxury home won’t have to be a burden. But don’t forget that luxury real estate is a commitment, even when uncertainties arise. Before investing, make sure that you have enough stable income to cover your expenses for a good six to 12 months. Above all, always plan strategically so that your vacation home will be an asset instead of a liability.

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