Deciding Is It a Vacation Home or an Investment (or Both)
Investment in the LBI Real Estate MarketLong Beach Island Real Estate
Buying a home in the LBI real estate market often is motivated by one of two purposes. The first is to provide a vacation home for personal enjoyment and the second is to provide a lucrative investment. In many cases, both purposes will be applied to the home as a buyer in the LBI real estate market can use their home for part of the season and rented for the remaining part thus generating income. At the same time, the home should appreciate and the long-term as would be expected from any investment product. It is important to keep investment in the LBI real estate market in mind when deciding on your vacation home.
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Investment in the LBI Real Estate Market
There are two basic financial reasons for investing in a second home on Long Beach Island. They are:
- Immediate income generated by LBI Summer rentals
- Appreciation of the home’s value in the LBI real estate market
It is important to consult with your accountant or financial planner to understand the tax benefits that can be realized from an investment in a second home. It is equally important to understand the realities of the local LBI real estate market and plan for unexpected events such as vacancies or storms.
The LBI summer rental market provides a unique opportunity for investment on Long Beach Island. It is entirely possible to purchase a home with a 20% down payment, cover the entire cost of ownership, and generate positive cash flow with LBI rentals. When looking at investment for purely rental income, one must calculate the entire cost of expenditures, including property taxes, mortgage payments, insurance (both homeowners and flood), and budget for unexpected occurrences. If you seek the right property in the right location, you can generate a return on investment of between 5% and 10%.
Appreciation the value of a home in the LBI real estate market should occur, but it will often take time. This kind of speculative investment is commonly seen by those looking to purchase a home and use it strictly as a vacation property. The expectation from these users/investors is that as the LBI real estate market values increase, so too will the value of their home. There is an immediate way to realize appreciation in the value of a home on Long Beach Island and that is through new construction. Building a new home in the LBI real estate market can be one of the best uses of your investment funds. Building a new home will typically save between 20% and 30% instant equity above the initial investment. This is a fantastic return for the project that should run approximately one year. It is very common to see individuals purchase of property, building a new home, and sell it purely is a speculative real estate investment. This investment is fairly secure, and even in the event of a market downturn, it is highly unlikely the market would depreciate 20% or 30% which is the depreciation that would be needed before the investment would lose money. If the market did turn downward, the investor has the ability to keep the property and rent which should more than cover the cost and generate a return on their investment.
Understanding LBI Real Estate Investment
For most buyers in the second home market, both on Long Beach Island and nationwide, a second home is viewed as both a vacation property and an investment. Long Beach Island offers the opportunity to serve both purposes for both through rentals, real estate speculation, and long-term appreciation. It is my job, is a real estate agent, to help evaluate the investment values of properties on LBI to help make an informed decision. Investment in the LBI real estate market offers great opportunities an excellent potential, however it is important to remember to discuss any investment with your accountant or financial advisor. For more information about investment in the LBI real estate market, CONTACT ME and I will respond right away.
By : Nathan Colmer | The Van Dyk Group
Cell: 609-290-4293 | Office: 800-222-0131 | ncolmer@vandykgroup.com
www.BuyLBI.com
Click here to search all homes for sale in the Long Beach Island NJ real estate market