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A beach house can mean an excellent return on investment (ROI), a reliable income stream, and access to a delightful vacation spot for its buyer.
Many beach house investors purchase homes with the idea of renting them out during peak tourism times. A beach house owner in Florida might rent out their property from November through April when residents of colder states crave sunshine.
Some beach house buyers claim that their rental income for the colder half of the year covers their expenses for the entire year. That effectively lets them live in the house for free during the non-peak season.
But before you take the beach house plunge, it is essential to understand the underlying economics involved in a purchase.
Drawbacks include high borrowing costs, exorbitant insurance rates, and copious bills, plus the general headaches of property management.
Key Takeaways
- Managed right, beach house rentals may let the owner live in the house for free during non-peak beach season.
- Timing your purchase is crucial because of the high amounts of leverage often used in the real estate market.
- Expect to pay more for both the house and insurance for it (including flood insurance) than for a house that’s not on the beach.
- Many beach towns have high taxes.
- Advertising for and managing a rental house means extra bills; owners may need a pricey property manager.
How to Buy a Beach House
Watch Your Leverage
Market timing is a crucial consideration when buying any piece of real estate. Most mortgages require down payments of 20% or less, so investors often use a substantial amount of leverage.
When you purchase something using a large amount of leverage, or borrowed money, the performance of your investment can have different impacts on your return.
For example, if the property price rises, your return would be augmented by the gain on the amount you borrowed. But if the price drops, your loss would also be amplified for the same reason.
Evaluate Market Conditions
There is no actual need to own a beach house, so prices for them tend to correlate with the economy more than other types of homes. So take note: if the economy has been strong for the last few years and real estate prices are rising, then the market could be overdue for a correction.
Similarly, lower prices and a depressed economy indicate that it is a good time to buy. The Case-Shiller Indices provide investors with a way to determine the overall state of the real estate market.
Buying a beach house involves the same considerations as purchasing a primary residence. However, first-time rental property owners may need to be extra careful.
Always inspect the house, preferably with the assistance of professionals, and talk with the owners. Look into the property deed, determine the level of crime in the neighborhood, and consider the area’s history of hurricanes and floods.
Important
Investors can lose substantial amounts of money by getting a mortgage on a beach house at the wrong time.
Real Estate Costs and Borrowing Costs
Beach house properties are substantially pricier than similar homes located inland.
In Sarasota, a popular beach town in Florida, the median house price as of May 31, 2025, was $427,873, according to the online real estate marketplace, Zillow. Depending on the specific neighborhood, prices can hover around $1 million.
Moreover, mortgage interest rates for vacation properties are also usually higher than those for primary homes. That can make a huge difference to an investor’s bottom line.
For example, the principal and interest payment on a 30-year, $800,000 mortgage, with an interest rate of 6%, comes to $4,796 per month.
The same mortgage at a 7% interest rate costs $5,322 per month in principal and interest. The $526 per month difference could prove burdensome (as could your monthly obligation at either interest rate).
How Much Is Beachfront Insurance?
The homeowner’s insurance on a beach house is likely to be several times more expensive than the coverage for a primary home. This cost difference is mainly due to often mandatory flood insurance.
Insurance charges spiked early in the 21st century, particularly on the East Coast, which had suffered widespread hurricane damage.
A yearly premium of $2,000 or more for private flood insurance is increasingly common for Florida beach homes in high-risk areas.
Other East Coast states, such as North Carolina, command more reasonably priced premiums. While insurance costs in California are typically lower than East Coast rates, the savings are generally offset by higher real estate prices.
Other Beach House Bills
Owning a beach house involves costs above and beyond the mortgage, utility, and cable. For one thing, the tax bill is likely to be hefty, given the high value of many beach houses.
Furthermore, if the beach house is an income property, homeowners typically must pay for marketing and advertising. Shelling out money to hire people to show off the property is only one part of these expenses.
Unlucky beach house owners might also have to foot the legal costs associated with litigating tenant disputes.
Property Management
Property management is a full time job that many beach house owners don’t want. Lease agreements and collecting rent checks are just the tip of the iceberg.
When something breaks, such as an HVAC unit or a refrigerator, the beach house owner is wholly responsible for the repairs.
Landscaping, painting, roof maintenance, and pest control represent just a few other tasks that fall under a beach house owner’s purview.
Air conditioning is considered an essential service in many parts of the country, and states impose specific requirements on landlords. That means beach house owners must fix the air conditioning in a reasonable time frame.
If they do not, renters may have the right to exit a lease or arrange repairs themselves and subtract the costs from the rent.
Most beach house owners don’t have the bandwidth to juggle these responsibilities without turning into full-time real estate investors.
Therefore, many employ a full-time property manager. The manager handles daily tasks, markets the beach house during tourist season, executes lease agreements, and evicts non-paying tenants.
A good property manager is expensive (and probably well worth the cost). Depending on the extent of services, most property managers charge 8% to 12% of the collected rent, which can quickly eat into an investor’s profit margins.
Why Is Beachfront Land So Expensive?
Despite the growing risks from global climate change and rising sea levels, the value of beachfront properties keeps increasing. The reason? Federal subsidies that cover measures to mitigate property damage from flooding and storms, along with tax incentives for high-end property owners, keep driving prices higher, according to an economic model developed by North Carolina researchers at Duke University and published in Nature Communications.
Which Florida Beach Towns Offer Investors the Best Value?
According to Realtor.com, Miami, Florida was a popular but high-priced option for investors in 2024. Jacksonville and Tampa also attracted investors with their much more affordable investment opportunities.
Will My House’s High-Season Rent Income Cover My Living Costs During the Off-Season?
It can. It’s a popular strategy that owners of properties in popular seaside towns along the coasts of the U.S. put into practice. But it’s important to determine all expenses and calculate all costs before investing in an oceanfront home.
The Bottom Line
Buying a beach house can be a smart investment if you know what you are getting into and have the funds to pay for all of the accompanying costs, from insurance and property management to marketing and advertising.
If you are thinking of investing in beach real estate, get to know the areas where you want to buy. Study the market so you can try to avoid buying when prices are high.
Thoroughly understanding the pros and cons of buying a beach house can help you make a smart investment decision.
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