The Outer Banks is known as a prime vacation spot. The area features very beautiful beaches and scenery. Thousands of people from all over the U.S. come to the Outer Banks every year for their vacations. There are many beachfront or near-beach homes for rent on a weekly basis.
The flow of tourists makes investing in Outer Banks real estate an appealing prospect. No matter where you buy in the Outer Banks (OBX), you’re never far from the beach. You can follow up your day in the surf and sun with some exciting dining and shopping experiences. Think about ocean vistas and the regular dolphin excursions. Owning your own vacation property means you stay as long as you want and do what you want.
Many owners of vacation properties in the OBX rent out their homes when they’re away. You set the time for your own vacations and rent out your place the rest of the summer. The peak vacation period in OBX is only 15 weeks long, which allows you to make some profits and still have plenty of time to enjoy the beaches yourself. Local property management companies can keep an eye on the place and take care of the details for you.
If that isn’t tempting enough, here’s the breakdown on three good reasons for investing in Outer Banks property.
1. Good Return on Investment
A premium location like the OBX makes an investment in local real estate a sound move. “Because of the demand for properties, the value in each one will only continue to rise,” said RE/MAX Surfside. You will eventually be able to sell for a good profit if you choose. In good economic times you can watch your OBX home value going up from year to year.
You should investigate the market to find out which is the best return for your purchasing power. Homes vary in value by location, and by any renovation required. While luxurious retreats cost the most, “fixer-uppers” can go for less, and, after repairs, still command high rents.
Either way, there will be regular costs that should be calculated into your potential returns, such as utilities, insurance, and property taxes, along with any repairs or maintenance. Property management firms may also charge you a handling fee. Take a look at the rental on surrounding properties to estimate the possible income, vs month-by-month costs and the terms of any management contract. In a place like the OBX, you can find real estate that works for you.
2. Tax Benefits
As a vacation property is considered a second home and an income property, you can write off the mortgage on your taxes, as well as all these maintenance and operating costs. You should always consult a tax specialist, but the potential write-offs can maximize your financial benefit.
Homes closer to the shore tend to cost more money, and involve higher operating costs, but they also provide the highest rents and greatest tax benefits. In the long term, pricier homes cost less in proportion to the purchase price. The good news is that if you generate at least 10 percent of the purchase price through annual rent, the property will pay for itself in a matter of years. In the meantime, every penny you put into it is deductible.
3. Cash Flow
When the day comes that the mortgage is paid all the rental income, less the operating costs you’re still writing off at tax time, is yours. This positive cash flow can continue for a lifetime, or even into your children’s. No matter who the property owners are, they can sell at any time to realize the appreciated property value.
Remember that coming up with a large down payment will reduce the interest and time of obligation on the mortgage principal. Much of the time the lucrative rental payments will cover the operating costs. And you still have the option of using the property yourself as long or as often as you like during the vacation off-season.
If rentals the rest of the year are paying for the place, you can keep coming back for a dream vacation that is virtually free.