What Are the Economics of Purchase a Beach Property?

Florida offers numerous days of warm sunshine throughout the year. The beaches are beautiful from sunrise to sunset. It only makes sense that you’d like to purchase a property that allows you to experience the best of the Sunshine State. If you are thinking about the purchase of a beach property, then you have something that can provide you with an excellent return on your investment. Whether you want to make this property your primary home, a place where you spend the winter months, or you want a reliable stream of income, Florida’s beach properties have exactly what you want. Before you make a final decision on one of the best beach properties that is available right now, however, it is important to understand the economics behind what it takes to successfully own this type of property.

Beach Property Comes with a Premium

There are some amazing deals in the Coastal Florida real estate market right now. When comparing beach properties to something that is more inland, it can seem like living at the beach is out of reach. It doesn’t have to be that way. Properties that are within walking distance of the beach are going to cost substantially more, but that’s because they offer benefits which cannot be found away from the shore. If you’re willing to walk a few extra steps to get to the beach or you’re willing to put in a few minutes of driving time, you can often find a property that meets the needs of your budget. Of course, the premium prices for beach property is well-known. The differences cannot be overstated. There are costs that you’ll face when you want to live at the beach. In return, you’ll be greeted with those coastal breezes every morning and that is a life-changing experience.

The Purpose of Your Property Can Affect Your Interest Rates

The best deal for a beach property is reserved for those that plan on it being an owner-occupied house. This has less risk to a lender, which means interest rates for the mortgage tend to be a little lower. Numerous factors will be evaluated to determine what your final rate will be, but for most buyers, vacation homes or rental properties will have a higher borrowing cost. If you plan to live right at the beach, if you require a mortgage, it may need to be a “jumbo loan.” These loans tend to be costlier than the traditional mortgage as well. This is because jumbo loans do not qualify for sponsorship by government-backed entities. In Florida, extended caps are not currently available, which means a GSE 1-unit limit is capped at $424,100. FHA 1-unit limits are variable and based on the county where you plan to purchase a property. In Pinellas County, the limit is $275,665. 

Current caps and limits are available through this link: http://www.bankrate.com/finance/mortgages/florida-jumbo-loan-limits-by-county.aspx Beach properties are especially challenging because many of them are offered at 7 figures. Once you reach the plateau of $1 million, fractions of a percentage point can make large differences in the final mortgage payment that is offered.

Beach Properties and Your Monthly Costs

Even if you’re not living on the coast, flood insurance is often a requirement for living in Florida. It is not uncommon for these policies to have an annual premium which exceeds $10,000. If your coastal property is deemed to be in a high-risk area, the costs could be even more. Property taxes must also be factored into the purchasing equation. Many buyers focus solely on the mortgage payment and don’t give a thought to a breakdown of what the monthly tax costs would be. If this is an investment property, then you’ll have the added costs of advertising, marketing, and showing to consider. Don’t forget about the administrative and maintenance costs that you’ll face as well. It is not uncommon for the operational costs of a beach property to consume 50% or more of the revenues it can generate, even when it is meticulously managed. If your new beach property will be an owner-occupied home, you’ll have general care and maintenance costs to face in addition to your regular utilities. Florida’s communities are highly regulated by homeowner’s associations. This keeps property values stable, but also requires monthly dues and property care requirements to be met.

Are You Ready to Begin Living at the Beach?

If you’re thinking about making the move to Florida or you’re already here and you’re looking to move closer to the coast, then Scott Addison can help you find the perfect property to meet your needs. You can turn your new beach property into an owner-occupied paradise, a revenue generation machine, or have it become your winter hideaway. There are plenty of advantages and disadvantages that must be considered when looking at Florida’s beach properties. When you live on the coast, every day can feel like it is a vacation. If you own property on the coast, it can be an excellent investment opportunity when it is managed properly. Now is the time to make the move to Florida’s coast. Opportunities for beach properties move quickly. If you love the Sunshine State, then it’s time to stick your toes into the sand and call the coast your home.