How to Buy a Beach House for Retirement

A beach house is a great place to retire. With oceanfront prices climbing steadily, it can be a good idea to buy a beach house now, cover your investment through rental income and then use it for retirement later.

Difficulty: Moderately Challenging

Instructions

1. Choose an area of beachfront that has a high number of rental properties. This means it is a popular rental destination, and you will be able to have steady occupancy and rental income.

2. Talk to local realtors. Choose realtors with solid local businesses and histories in the market.

3. Survey weekly rental prices. Many beach home rental companies have booking websites that show the cost per week on a year-round basis.

4. Calculate your budget. You need to consider down payment, mortgage carrying costs, insurance, furnishings, general maintenance, improvements and rental commissions. Compare the costs to the rental income to guide your decision on what to buy and when to buy.

5. Get tax and financial advice. A financial planner can help you assess the numbers. There are some instances where you can use IRA accounts to purchase investment properties, but the Internal Revenue Service regulates such practices closely.

6. Decide on how to manage rentals. Rental agents in established beach communities get a percentage of each rental, but many offer full service such as light maintenance, answering tenants' needs on site and advertising. You also can manage it yourself.

Tips & Warnings

• The beach house that is right for rental income may not exactly match your dream retirement spot on the ocean. Remember, there may be compromises to paying a decent price now over an unreachable dream home in 10 years.
• While beach home prices can reach into the millions of dollars, there are still a few undiscovered or barely-discovered places left. Seek these out, keeping in mind that rental income might be lower but long-term value will be higher.
• Plan ahead. If your goal is to be mortgage-free by retirement and the purchase price is high, it may take a number of years of rental income to hit your target.
• Enjoy your property too. You are working hard to make this happen, so book a few weeks for yourself.
• There can be tax implications on rental property losses. Make sure your accountant and lawyer remain in the loop.

Resources

• Visit Beach House for listings, special offers and information

[lindygsc]

on 7/9/2009 As a realtor living and working on a resort island, I agree with your tips. A few more things- look at the mix of rental/residential homes in the area. If this is a place where you eventually plan to live full time, you'll probably want some full time neighbors as well. Consider the costs of insurance, as beach properties need homeowners, wind/hail and flood coverage- you may be in an area prone to hurricanes!
Consider a 1031 tax-deferred exchange- talk to your accountant or financial advisor.
This is a great time to buy, as the inventory is high and prices are down.
Linda Gordon
Resort and Second Property Specialist
www.lindagordononline.com