Is a Beach House a Good Investment for a Vacation Rental Business?

Picture the stunning views of the ocean lapping on your doorstep. Or drinking a warm cup of coffee on the balcony as you watch the sunset hovering over the water. And hearing the gentle crashing of the waves as you sleep. These are the unique perks of owning a house by the beach. But is a beach house a good investment? More so, is it worth investing in a beach house to earn revenue as a vacation rental property?

Let’s unpack what it takes to invest in a beach house vacation rental that successfully earns a steady rental income.

How Much Does a Beach House Cost?

The cost of a beach house investment property can vary drastically depending on the location, size, and amenities of the property.

On the more affordable coasts of the US, beach house investment property could start at just over $230,000 and more luxury beach houses could cost more than $1 million. Therefore, it’s crucial to have a clear idea of your budget before you decide to start looking for your own beach house investment.

How Much Rental Income Can I Earn With A Beach Vacation Rental?

Purchasing a beach rental is by no means a get-rich-quick investment. It takes time and money to run a successful vacation rental business. However, once you hit your stride, the investment can be highly lucrative.

Once again, the amount of rental income you can earn will depend on the beach house’s size, location, and amenities. Generally, though, successful beach house vacation rentals could typically earn anywhere from $20,000 up to $50,000 in yearly rental, although some could make less, and others, way more.  

When running any vacation rental business, it’s crucial to be as cost-efficient as possible by streamlining and automating the daily activities of running the business. Vacation rental software like iGMS helps hosts maximize their revenue and ROI by offering robust tools for every aspect of their vacation rental management.

With iGMS you can:

• Managing multiple accounts and listings on the top OTAs from a single interface
• Synchronizing reservations across multiple platforms to eliminate the risk of double bookings
• Organizing messages into a single feed with a unified inbox
• Improving communication with automated templates and triggered messaging
• Automating the process of guest reviews
• Creating and coordinating cleaning tasks with live tracking to completion
• Creating your own direct booking website
• Managing direct bookings using a direct booking management toolkit
• Processing payments securely via integration with Stripe.
• Creating essential reports on your business results within minutes
• Adjusting your pricing in a smart way through integrations with PriceLabs, DPGO, and Wheelhouse

What To Know Before Buying Beach House Investment Property: Pros and Cons Unpacked

If you’re trying to decide whether or not it’s the right time to be buying a beach condo, the best thing to do would be to consider the pros and cons of the investment. Let’s unpack what to expect.

Pros

1. Attract a higher rental income

On average, beach property attracts a higher income than those not offering beach amenities or something similar. Naturally, the higher prices you are able to charge per night for your rental home, the more chance you have of turning a profit quickly — provided your expenses are kept under control.

The higher potential income is one of the main incentives to invest in a beach vacation home.

2. You have a second holiday home at the beach

While the main purpose of a vacation rental investment is to rent your home out to guests, the beach house will still be your property to enjoy for personal use when you want your own escape.

It will be even easier to book a beach vacation if you already own a holiday home at the beach which you can simply block out of your availability calendars and enjoy with friends and family instead.

3. It’s easy to market a beach house

With the stunning ocean views and the built-in beach activities, like swimming or surfing, for guests to enjoy, the beach house will practically market itself — especially during peak season in the summertime.

Having the luxury of adding “beach house” to your listing title and description and including enticing images of the sea in your listing will stand out among the competition and get travelers clicking on your listing.

4. Beach house property increases in value over time

While all property increases in value over time, depending on where it is located, a beach house could appreciate faster than traditional properties. This means that even if you decide to sell your property after a few years, you should still be able to get great resale value for it.

Cons

1. Rental Income depends on location and season

When it comes to beach property, the potential earnings greatly depend on its location and the length of the high season. Simply buying a beach condo near any ocean does not necessarily guarantee you high profits. The location would have to be tourism-friendly to contribute to the overall offering.

Similarly, while a beach property thrives in the summer months, if there’s not much else to do in the beach towns, your rental income will suffer during colder seasons when guests aren’t as interested in going to the beach.

2. Higher insurance fees

Beach houses are more prone to water and weather damage and have a higher risk of flooding. Because of this, homeowners insurance will be more costly and you will need to take out extra mandatory flood insurance to ensure your rental is covered. This could cost thousands of dollars depending on your property.

3. Higher maintenance costs

Along with the higher insurance, you’ll also have higher maintenance costs when you own property close to the ocean. The water and high winds will be harsh on your foundation, windows, roof, etc., and will mean that maintenance and repairs will have to be performed more regularly than the average property. These costs could add up quickly.

4. Higher taxes

The most popular beach towns usually come with high property taxes that will eat at your bottom line. You may also pay higher taxes the closer you are to the ocean. You can expect these taxes to increase over time too.

Because these costs, along with your mortgage payments, need to be covered whether you earn enough income from your vacation property or not, you’ll need to have a solid business strategy in place to ensure your prices remain competitive and your occupancy rates are high.

It is also a smart idea to chat with a tax consultant to see if there are tax benefits you may qualify for when running your short-term rental business. Tax deductions exist where you’re able to write off business-related expenses. This could significantly reduce your tax burden.

How To Buy A Beach House: 6 Steps To Follow

If you’ve decided to join the thriving rental industry by buying a beach house, it is always best to arm yourself with enough information to make a sound beach home investment. Here are the steps every host should follow when investing in a beach house that will remain booked year-round. 

1. Choose the right location and neighborhood

As mentioned previously, some beach towns will attract higher bookings and generate more money than others. The best beach towns are even popular enough to keep demand high during all four seasons.

These beach towns are the ideal place to start investing in beach rentals because they will have a higher earning potential per property.

2. Consider the actual distance from the sea

If you’re committing to the beach experience, your beach rentals can’t be too far from the actual beach. There’s nothing worse than promising your guests a beach vacation when your beach rental is a 30-minute drive from the sea.

Obviously, the ideal situation would be to have a beachfront property with the sea on your doorstep. However, these beach rentals are significantly pricier to buy and may not be financially feasible.

In this case, we recommend that your guests should either be able to see the ocean from the rental property, or it should at least be within walking distance of the beach.

3. Ensure your property and location offers other amenities besides just sand and sea

Yes, beach fun and activities are a big drawcard when it comes to short-term rentals, especially for young travelers and families. Though, sadly, the competition is tough in beach communities, so your property and location need to offer more than just the ocean shores to ensure year-round bookings. Offering only sand and sea could affect the earning potential, especially during low seasons in the winter months.

When buying a beach house, pay close attention to what other amenities and activities are available in the area that potential guests would enjoy. Anything like a private pool at the house, a cinema or theatre, a shopping mall, or a hiking trail will ensure that your rental property is not only popular in a single season.

4. Pay careful attention to how well the house is built

Knowing that owning real estate by the sea can bring harsher weather conditions and risk of water damage, it’s best to ease the risk early on in the game by ensuring the properties you’re considering are well built with good quality materials.

When viewing potential properties, there are various aspects to pay close attention to, such as:

• How secure and well-built the roofing is
• What floodproofing measures are in place
• How durable the windows are
• The sturdiness and strength of the foundation
• Any past damage to the property (the local realtor should disclose this).

5. Research any limiting regulations in the area

Local laws and regulations could stand in the way of your property management and running your beach rental business. Some cities may ban vacation rentals, or have very limiting restrictions in place.

If you’re considering buying a beach house in any particular location, it’s best to do some extra research into the local laws and regulations for vacation rentals before making a huge investment into vacation rental properties only to be caught up in government red tape.

6. Define and stick to your budget

We’ve already touched on how wide the price range could be for buying a beach house. So, as part of a smart investment strategy, you need to have a clear idea of what your spending budget will be before you start house hunting, and stick to that budget as strictly as possible.

Remember that there are other expenses besides the cost of the actual house that you will need to budget for. There are transfer and realtor fees, and you may have to pay for house inspections too. Not to mention, once you’ve bought the beach rental, you’ll need to spend money furnishing it. If you are going to rely on a property manager, you’ll also need to budget for property management fees.

So, Is Buying a Beach House Really a Good Investment Strategy for a Vacation Rental Business?

In short, the answer is: it depends. To earn a good return on this kind of real estate investment, the conditions have to be just right.

If you are willing to put in the work to research a profitable location and spend time finding a property with great earning potential — and you’re open to using tools like rental software to help boost your property management — it would be a smart investment to buy a beach house.

However, if you’re banking on finding the cheapest properties that qualify as a beach house in order to cash in on the demand, you may find yourself stuck with a money drain in low seasons.

So, the million-dollar question is: which areas are best for a vacation rental by the sea? Let’s take a closer look.

The Best Places To Buy a Beach Rental

While this is by no means an exhaustive list of the best beach spots for vacation rental property, it provides a great place to start looking.

1. Florida

Florida is an international tourist attraction, making it an ideal place to invest in vacation rental property.

Add Cape Coral to your list of locations to take a look at. It not only offers stunning beaches along the Gulf Coast but also the Sun Splash Family Waterpark, boating, fishing, and golfing activities.

Destin is another great area in Florida to look into, with family-friendly sea activities like snorkeling, and excellent shopping and entertainment options for those who prefer to stay on land.

2. South Carolina

Murrells Inlet in South Carolina deserves a place on your list too. There are tons to do both in the sea and on land, and it caters to true nature lovers.

Some of the main attractions include kayaking, birdwatching, oyster harvesting, deep-sea fishing, waterfront restaurants, live music, and cultural events. `

3. Texas

Texas has a lot going for it, and Surfside Beach is one of them. It is one of the lesser-known beach communities, so buyers could find some good beach houses in Texas.

4. Michigan

Michigan brings a unique offering to the table because it is surrounded by port towns, lighthouses, and dunes, making it a picturesque option for short-term rental investment.

Take a peek at Traverse City to see if their waterfront properties suit your fancy. Travelers can also enjoy memorable experiences enjoying the local wine events in summer while making the best of the snow-covered dunes in the winter.

5. Hawaii

While you may encounter some HOA regulations in Hawaii, it’s not impossible to work around them. And once you do, there’s lots of potential for a prime real estate investment.

Take a look around Lahaina, Hawaii, to see if any property catches your eye. The properties are pricier here, but the higher average prices you can charge per night more than make up for it. The island offers swimming in freshwater pools, viewings of lava formations, and even features whale migration sightings and events.

In Conclusion

We hope that we’ve successfully answered “Is a beach house a good investment?”. Beach houses, as shown above, can be a great choice for an investment. Beach vacation rentals are growing in popularity, and our guide can help you get started!

About the Author
Callan Riddles is the Content and Social Media Specialist at iGMS. Callan has a passion for finding new ways to help vacation rental businesses thrive. In her free time, she loves to travel, read, and experience all the new things that life has to offer.