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Your getaway style
Some vacationers love the idea of walking into a beach house that's been prepared hotel-style, living it up, then walking out at the end of the trip, never having to worry about the place.
Others enjoy becoming part of a new community in a way that summer visitors can't. Or they relish personalizing their bungalow with furniture, paint and renovations, says Andrea Ackerman, associate broker with Brown Harris Stevens of the Hamptons, in New York.
A big consideration is the number of days you can spend at the beach throughout the year. Will it be worth the investment as well as a monthly mortgage payment?
You don't want to shell out a payment every month for something you never use.
And is the place convenient? The more available it is to you, the more time you'll likely spend there, says Lorraine Stewart, vice president of mortgage lending for BECU, a Seattle-area credit union.
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Location, location, location
Many communities offer homes on the ocean, bay, harbor, river or inlets. So renting is a good way to try different areas and find out what you like best, says Mary Ann Cinelli, real estate agent with Brown Harris Stevens of the Hamptons.
If you're thinking of buying, you want to explore the community in the offseason, too, says Ackerman.
And check out the development plans, both for your neighborhood and the town itself, says Laura LeFevre, broker with Southport Realty in Southport, North Carolina. You don't want to sink money into a beach house only to discover that there's an eyesore coming in nearby, she says.
With a summer rental, it's still smart to know the area before you part with a large stack of cash.
But when you're making a financial investment in the community, you really need to take a hard look at your favorite dream spot without the vacation goggles.
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It's the last thing you think of when you picture your new beach house: insurance coverage.
And depending on whether you rent or buy, you'll be looking at very different ways of protecting yourself and your property.
If you buy, flood insurance is a must in many areas, says Chris Hackett, senior director of personal lines for the Property Casualty Insurers Association of America.
In some hurricane-prone locations, you'll also need wind and hail insurance, says LeFevre.
And while the right combination of coverage will reimburse you financially if your home is destroyed by storms or erosion, in some areas you may not be allowed to rebuild, she says.
With a summer rental, your homeowner's policy (if you own a home) will likely cover the possessions you're toting with you, says Hackett. But you want to check with your insurance agent to be sure.
And the rental website or property management company may also provide some coverage, Hackett says.
Also, investigate trip insurance to cover you in case bad weather or personal emergencies put a damper on your vacation plans.
Carry it with you or furnish a second home?
When you rent, you have to schlep everything you need for your vacation to your temporary quarters and back again.
That might seem like a hassle, but if you own a beach house you'll need to outfit it. "And the cost of furnishing a home, not only with furniture but dishes and kitchenware -- it's quite expensive," Cinelli says.
And you can't skimp if you want to rent out the place.
When you buy, look at how much redecorating or renovating the house will need, and include those numbers in your plan.
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If you own, you might be able to rent it out, too
If you own a beach house, you can rent it out to defray costs.
But you have to be realistic. Look at the rental income the property has earned in the past. And analyze what similar homes nearby are making, says LeFevre.
Subtract fees you pay to the listing website or management company and factor in extra wear and tear.
Some communities make renting easy, even offering on-site management to facilitate it. Others frown on it. And in some areas, you could need a license and inspection, says Cinelli.
Renting isn't something you can do unless your house is in pristine shape. And you need the right kind of beach house, says LeFevre. Often, the homes that make the most money are the ones with multiple bedrooms and bathrooms, she says.
That's because beach rentals are most popular with big families or groups of friends getting together for the summer, she says. Singles and couples tend to prefer hotel-style condos or bed-and-breakfasts.
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If you decide to focus on beach homes for sale, you'll need a better credit rating and a larger down payment than you would for a primary home, says Ron Haynie, senior vice president of mortgage finance policy for the Independent Community Bankers of America. "These won't be loans that you see people with 650 credit scores getting."
Some lenders may want bigger down payments -- at least 10% to 20% -- and you may also see slightly higher interest rates or have to pay more points, says Stewart, of BECU.
The lender will want to see a larger cash cushion -- likely 6 to 12 months of mortgage payments, says Haynie.
Prospective rental income won't help with financing. As far as lenders are concerned, "this is a piece of property you're going to carry yourself," Haynie says. "You can't look at rental income to support it."
If you've got the money and good credit for a mortgage, estimate how often you'll be able to spend time at the beach. Then look at how the cost of renting for those periods compares with the expense of a monthly mortgage.
"If you're only going to be down there a week, is it better to rent a place?" says Haynie.
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Analyze 'hidden costs'
You'll likely need a caretaker or someone who can look in on the place between visits if you buy.
Price monitored security systems, since vacant homes can be criminal targets, says Hackett. You might also need extra liability insurance, especially if you rent the place.
There are also the maintenance costs -- which can be higher in seaside climates, says LeFevre.
But you can subtract the money you won't be spending on hotels or vacation rentals. And a conservative amount that you could reasonably recoup if you'll be renting it out.
Is it a smart move? "Does it make financial sense to purchase a property where I like to vacation or, at the end of the day, does it make more sense to rent?" says Stewart.
You want something that will hold its value, but no one has a crystal ball.
"Beachfront property can be the hottest thing in the world, then it's not," says Haynie. "It's highly dependent on traffic and recreational activity. To get out of it, you might have to write a check."
Consider lost opportunity costs, too, he adds. Would travel to other places make you happier?