Beachfront condos are everyone’s dream. People who own beachfront condos have vacation rental accommodations at their fingertips anytime they have a few days off. However, purchasing beachfront condos isn’t always a great decision. If you don’t get the use out of that you had planned, they might be more money than you’d hoped, with little benefit. If you’re considering purchasing a beachfront condo, standby for our list of things to thing about before even looking at beachfront condos for sale.
Six Mistakes People Make When Purchasing a Beachfront Condo
- Mistake:Purchasing vacation rentals as an investment.
Some people think of a vacation home as somewhat of a retirement investment. If they ever needed to get cash fast, they could sell their vacation home. However, a piece of real estate is not the kind of asset that turns into money you can use in a pinch. Depending on the market when you decide to sell, it might not be easy to move very quickly. In fact, the occasion that you’d need to sell a vacation home is likely when the economy has taken a hit and you are unable to generate any income from your investment (or you need cash due to job loss); it is very difficult to sell in this position and you’d likely have to take a loss in order to move it.
If you can afford to purchase a vacation rental for your person enjoyment, and if you can rent it out when you aren’t using it, then that’s icing on the cake, it’s a great option. If you’re purchasing your vacation rental as a nest egg for the future, you could make a lot more money, faster in another way.
- Mistake: Skipping over the HOA fine print.
One of the most common mistakes that vacation rental purchasers make is assuming they can rent out their condo when it isn’t being used, to cover the cost of the mortgage. However, many homeowner’s and condo associations do not allow homes to be used as short-term vacation rentals at all. This is what we call the “Up a creek without a paddle” scenario.
Other associations allow you to rent out your condo, but only if you use their program, which may put particular stipulations on the decor and amenities that you offer. That might significantly cramp your style and turn your vacation rental purchase into a grade-A bummer. Before purchasing a beachfront condo, make sure you read over the fine print for what you can and can’t do with your condo.
- Mistake: Not planning for additional costs.
The mortgage you’ll pay on you condo is only the beginning of the costs you’ll pay for it. You’re going to have utility bills (some of which will arise even when you aren’t there, using the utilities). You will likely have to pay monthly HOA or condo association fees. You’ll be subject to property taxes. You’re going to have to pay for homeowner’s insurance. It is important to use a security service to protect your home, especially because it may sit unoccupied for long periods of time (a factor that burglars target). You’ll have to fork over money for maintenance and upkeep of it. Some HOAs require you to use a specific professional landscaping service. All of these costs will add up. Even if you can swing the cost of the mortgage, you need to make sure that you can afford all of the other costs associated with owning a vacation rental.
- MISTAKE: Being unrealistic about the income you’ll get from it.
When you calculate the potential income that you’ll get from your vacation home, it is not as simple as calculating the rent you’re charging less cost of the mortgage and fees that we mentioned above. In order to catch the eye of tenants, you’ll have to advertise your vacation rental somewhere. You’re going to need to have your home cleaned between tenants, which will take another bite out of the rent you charge. If you use a property manager to manage the rental, it will take an additional percentage off the top. Before purchasing a vacation home as an income generating investment, it’s a good idea to go over your business plan with a financial advisor to ensure that you’ll be profitable.