YOUR GUIDE TO INVESTING ON LBI

To begin at the beginning you as a real estate investor need to determine what your goals are. As I mention above, for some the investment is strictly to generate income in the form of a rental property or a house flip. For others, buying a home on LBI is a vacation home with long term equity appreciation in the back of your mind. Others hope to buy a home for personal use while renting out a portion of the summer to help cover the bills.

There is no right or wrong answer. Rather it comes down to your personal goals. What DOES matter is defining your goal upfront as this can have a significant impact on the type of property you should buy in the Long Beach Island real estate market.

The LBI real estate market, like many markets, comes down to location. Generally speaking properties on the oceanfront, ocean-block and oceanside will make better investments long term. This is in terms of both rental and equity position. This is not to infer that homes on the bay side are a poor investment-only that their returns usually lag behind that of the oceanside, ocean-block or oceanfront.

After location the actual type of property must be defined. When looking for a home in the LBI real estate market, especially as an investment, the overall cost of ownership must be considered. For example, a home that is below base flood elevation will have a higher cost of flood insurance. This will lead to higher carrying costs which can negatively impact your returns.

When looking for a spec home (house flipping on LBI) location and lot size are key. The location must be one that will be desirable in the market with a new home built on it and the lot size must be such that a desirable home can be designed. I can go over the specifics of building with you to help you determiner what are the best options in various price points and total budgets but you should see a roughly 20%-30% equity position for the project to make sense.

Regardless if you are looking for a rental investment or a house flip there should be plenty of market data to support the investment and the investment's projections.

When looking for a property in the LBI real estate market as a rental it is fair and expected that you will ask for any past rental history. If there is not a proven rental history that is not in of itself an issue. It is better to look at the fundamentals of a property and the potential, supported by comparable rentals of course, to determine if the rental investment makes sense.

When looking at a flip it is best to look at the final projected sales price, which again should be supported by plenty of comparable sales on Long Beach Island, and then back out your estimated costs. Keep in mind the 20%-30% equity position I mentioned above. If you cannot comfortably achieve that the project needs to be examined more closely and perhaps skipped over.

Investing on Long Beach Island is no small task. Regardless of the price point homes and condos in the LBI real estate market are expensive and will most likely constitute a rather large portion of your net worth. Before making any investment in the Long Beach Island real estate market it is imperative that you speak to any and all financial planners, attorneys, etc. to make sure that this is the right investment for you and that there is a benefit to your making such an investment. Specifically consider how taxable rental income can impact your overall financial picture, if there are any tax advantages to owning another home on LBI and make sure you have enough of a cash reserve in place to withstand any surprises (home repairs, longer hold periods on a spec, etc).

Once you are comfortable with the overall investment prospect on LBI it is time to see some homes. I recommend looking at a variety of home styles and locations before really defining what type of investment you are considering. For example, if you are looking to build a new home for resale, and are rather new to the process, it may be better to start off with a smaller bay side project that will involve less capital upfront.

By looking at a multitude of options and locations you can customize the project for your needs and budget.

Once you have identified the right type of investment (rental or flip house) and the right location for your price point it is time to get specific. By this I mean putting together an estimated cost for each option, including carry costs, potential gross, etc. and seeing which option makes the most sense. Keep in mind the entire picture. The highest POTENTIAL profit may not be the best option if the project is too risky, not backed up by sufficient comparable homes, etc.

I am happy to help in any phase of the investment process so please do not hesitate to contact me with any and all questions about investment in the Long Beach Island real estate market.