Considering Buying A Beach House and Will Rent Out (OBX)

[Anonymous]

I read somewhere that some homeowners in OBX could no longer get homeowners insurance. The ocean is rising. I know several families that had houses for generations that are now permanently underwater. If you want a beach house to use sometimes and rent out others to offset costs, fine but I wouldn't consider it a good long term investment.

[Anonymous]

We like OBX, but we also like to go to Europe, the Caribbean in the winter and UT to ski.

We have the income to buy, but would never do that. It’s too far from DC to use on weekends, so it would end up eating into our other vacations.

Maybe when we are older and have more vacation time, but for now enjoy paying to rent and letting someone else stress about hurricanes, etc.

[Anonymous]

Anonymous wrote:I read somewhere that some homeowners in OBX could no longer get homeowners insurance. The ocean is rising. I know several families that had houses for generations that are now permanently underwater. If you want a beach house to use sometimes and rent out others to offset costs, fine but I wouldn't consider it a good long term investment.

My parents have a house right on the water. This is untrue, they have insurance.

[Anonymous]

Forget beach house. I will not own a second home for the purpose of renting it out - same story for my parents, in-laws and brother. The headache! The risk, the work. Not worth it. One can get lucky but not unless one is in a LCOL area and the house is not worth much.

[Anonymous]

Downsides:

Salt air. Corrodes everything. HVAC units, paint, you name it.

Renters beat the hell out of a place. Rental managers are expensive and may or may not do a good job.

Insurance is available, but expensive. Flood insurance is only going to get more expensive (read up on the legislative battles over making the program pay its way). Wind insurance (separate from homeowners) is expensive. Our Policy is through Lloyd’s of London, which was cheaper than our only other option.

Be prepared to run down at a moment’s notice to install hurricane shutters (which aren’t cheap).

If your house is damaged, you can’t get flood insurance unless you rebuild to the updated code, which may involve elevating the house.

If waterfront, erosion is a real issue. As well as sinkholes.

Your relatives and friends will all expect a deal on rentals.

Mortgage rates on a second home are higher.

I’m sure I’ll think of some more if you give me some time.

[Anonymous]

Think about why you like this place so much. Imagine if you really had to deal with every little maintenance issue that currently, you forget about the second you lock up on your last day.

The LAST investment property I would want to buy, would be the one I love to vacation at.

[Anonymous]

We own a beach house in Virginia Beach. We skipped OBX because the management companies have a stranglehold on the rental market. After fees and hidden costs, they take about 35% of the rental income. The contractors also have a racket there. We picked VAB because there are a ton is actual residents there. I exclusively market via Airbnb and vrbo. I don't use a management company. We used a cleaning service that charges 250 per cleaning that is passed onto the renters. We have a great electrician, plumber, and handyman who work on call. We are also only 3.5 hrs away incase we need to meet a contractor for a serious job or if we need to compete the work out.

I usually only have maybe one or two hassles a season. I have many regular renters that we transact business off the VRBO and airbnb platform which makes it cheaper for the renter.

I could never keep nearly 100% of my profits in OBX as I do in Virginia beach. However peoperty is much more expensive in VAB. But I love love being able to very easily drive to my house in the off season and use it for a long weekend. My house is also only 4BRs, so we never get big destructive party groups.

Expenses are ~54k/yr (PITI+utilities)
Maintenance is budgeted at ~12k/yr (keeping furniture updated, exterior, repairs)
Rent brings in, during the summer ~60k and we get some off season renters and have had some people winter there.

All in all we barely break even. A bad year we lose. It is not an investment, however our actual property has increased substantially in the last few years and we've been rezoned and can tear our house downand put up a duplex which greatly increases resale. If we had to use an OBX type management company it would be a complete bust.

[Anonymous]

Unless you plan to clean, change sheets and do maintenance yourself, it is not a good investment or business. Just rent once a year and put the rest of your money in retirement.

[Anonymous]

It depends. Are you the kind of person who enjoys dealing with constant issues ranging from unpleasant people, maintenance and payment problems only to break even, if that? If yes, go for it! (speaking from experience and i will spare you the details)

[Anonymous]

Anonymous wrote:The owners who succeed in this long-term grew up there and know the area well, and/or make rentals their primary business. Either is a critical advantage to make their clients happy, and it eliminates the need for a management company, which is the surest way to fail, for two reasons: it eats up profit and also doesn't ensure the best service to customers.

In other words, your plan needs tweaking or scrapping, OP.

management company takes 15% to 20% off the rentals, depending on how many houses you list with them.

[Anonymous]

My parents owned a place at an N.C. beach for years and rented it out, but it only “worked” for a few reasons. The property was about a block from the beach and not in an area likely to be underwater anytime soon. They didn’t need to worry about problems with resale in that time and place. They didn’t expect to make a profit- just offset part of the cost of the mortgage, upkeep, etc. They lived just 2 hours away, so one of them could be physically present as needed for emergencies, without too much lead time. They had a management company that sucked a lot of the rental income, but made renting easy. They were willing to comply with the regulation (I don’t know if it was a state regulation, if it still applies, etc) that in order to claim a property as a summer rental for tax purposes they could not “reserve” the property themselves more than two times in season. They sometimes checked ahead with the rental management company (on a Friday) and if the place wasn’t rented they or a family member would go for the weekend without officially reserving it, but it was usually rented. They rarely could use the property in the summer for this reason, which was fine with them because they preferred to use it in the spring and fall.

It worked for them, but I wouldn’t buy a house on the OB today, rental or not.

[Anonymous]

I have a rental in OBX I got in foreclosure. Doesn't seem like many people here have actual experience with this.

#1 no idea where that poster got the idea that due to rising sea levels it is uninsurable. Maybe too many Al Gore movies? Our home is insured.

#2 I am not in love with the home. This is an investment.

#3. Hassle? What hassle? The management company handles everything.

#4 the net? Out home rents, during high season for 7500/wk. We also get some rentals off season. Last years P&L after all fees all maintenance, absolutely everything netted us $62,000. This is mainly because our purchase price was phenomenal and we paid cash. We did sink 150k into upgrades and furnishings up front. So our entire purchase price was 750k. One block off the ocean front.

This is not our best investment and has been more of a pet project. I would not buy a beach house full retail. ONLY via foreclosure or short sale. I'm sure many opportunities will be on the horizon as the economy is what is sitting on sand right now.

[Anonymous]

You are nuts to buy a home in the Outer Banks which could be under water by 2050 and will likely be obliterated by a major hurricane long before that.

If you want to buy a second home, including one at the beach, at least buy one that is on land and not a sandbar.

[Anonymous]

Anonymous wrote:OP again. We would use a management company to manage the rental aspect.

They take 30-50% off the top. And while they are managing you still have responsibilities and when there are issues you get involved. “They are putting a new house on the roof next door, we didn’t pay 15k a week to vacation next to a construction site”, was my favorite.

People do dumb stuff to house that are theirs. I know of a house that rent for over 20k a week, tried to figure out what happened to all of their deck furniture, till they saw all of the burnt nails and screws in bottom of fireplace. Another house, pool guy went to fix hot tub that wasn’t filtering, 3 filter cartridges and filter intake pipe were blocked with pizza.

[Anonymous]

If you decide to go forward, the only beach that I know of that is not eroding is Sunset Beach, NC. Its a little further down from the outer banks (7 hours drive from DC), but it has been accreting for years.