My wife and I are looking to purchase a beach house on Long Beach Island New Jersey in the foreseeable future. Long Beach Island has been a vacation spot of ours most of our lives, and we want to be able to own a house that our family can spend quality time together at. Our only way to make this happen since LBI is an expensive market to get into is to purchase a property, rent it out in the summer so that rental income can cover the mortgage/taxes/expenses for the year, and then enjoy it in the offseason.
There are a few complicated aspects though in order to make this work.
1. LBI is an expensive market to get into, and rentals are typically weekly. From the research that I've done, a typical rental season is anywhere between 12-16 weeks so in my analysis I have been running rental numbers for 15 weeks. The rest of the year will most likely be vacant which is a long time.
2. Weekly vacation rentals have variable prices, so early in the summer is cheaper, July and August are the most expensive, and September might rent out for a few weeks. I have been trying to analyze properties by including an average weekly rental price in my spreadsheet.
Here are my questions for you all:
1. With beach houses being in such short supply and prices very high, should we wait a year or two to get into the market?
2. If we are simply looking at this as a way to afford a beach house and pay the mortgage/costs with rental income, should I accept a lower cash on cash return and annual cash flow than a typical rental property would demand? I still include capital expenditures, vacancy rates, and all of the other expenses in each analysis of mine. But it is very tough to find a property with a respectable annual cash flow worthwhile.
Why limit your property to just vacation rentals? You can rent it out through the whole year to traveling workers, visiting professors, travel nurses, consultants and production companies for adult movie film scenes.
I don't see house prices going down anytime soon or ever.
I would be ok with lower return knowing I could use it too.
If you go with the adult film route, it would be a good idea for you to be present during the production. Make that part of the agreement.
I would be open to renting to anyone who wants to rent, except for that route. Thanks though!
I've been looking to buy an STR at the Delaware/Maryland beaches the past few months. There is so little inventory on the market right now, I have put it on hold for a bit. The past 2 or 3 months, prices have skyrocketed and everything's been snapped up. Right now is the time when second home buyers want to buy a place for this summer. And also when owners have rented out their houses for the summer, and want to keep the profit from that, so fewer want to put them on the market right now. If you can wait till later this summer, I think you'll find a lot more on the market.
For any circumstance, if the property will be owner-occupied at any point, you have to be willing to accept a lower return.
You are not buying the property as an investment, but as a vacation/second home that you hope you can rent out to breakeven.
If you were buying it as a investment, you would be squeezing returns, but since you want to live in it, that should be the most important factor. If you can break-even and afford it, I would say buy it for the enjoyment, not because it makes a good investment.
My wife and I are in a somewhat similar circumstance on the other coast. Looking at and in contract on a beach/bay house. Doing the math we will be covering most of our expenses in the peak season with rentals and have the place more available for us the rest of the year. I can’t say that we could look at it purely as an investment if we are going to be able to use it personally. However if the business side really takes off then maybe it will fund another investment.